Correlation Between EV Advanced and Homecast CoLtd
Can any of the company-specific risk be diversified away by investing in both EV Advanced and Homecast CoLtd at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining EV Advanced and Homecast CoLtd into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between EV Advanced Material and Homecast CoLtd, you can compare the effects of market volatilities on EV Advanced and Homecast CoLtd and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in EV Advanced with a short position of Homecast CoLtd. Check out your portfolio center. Please also check ongoing floating volatility patterns of EV Advanced and Homecast CoLtd.
Diversification Opportunities for EV Advanced and Homecast CoLtd
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between 131400 and Homecast is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding EV Advanced Material and Homecast CoLtd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Homecast CoLtd and EV Advanced is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on EV Advanced Material are associated (or correlated) with Homecast CoLtd. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Homecast CoLtd has no effect on the direction of EV Advanced i.e., EV Advanced and Homecast CoLtd go up and down completely randomly.
Pair Corralation between EV Advanced and Homecast CoLtd
Assuming the 90 days trading horizon EV Advanced Material is expected to generate 1.44 times more return on investment than Homecast CoLtd. However, EV Advanced is 1.44 times more volatile than Homecast CoLtd. It trades about 0.04 of its potential returns per unit of risk. Homecast CoLtd is currently generating about -0.01 per unit of risk. If you would invest 147,005 in EV Advanced Material on September 28, 2024 and sell it today you would earn a total of 33,395 from holding EV Advanced Material or generate 22.72% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 99.59% |
| Values | Daily Returns |
EV Advanced Material vs. Homecast CoLtd
Performance |
| Timeline |
| EV Advanced Material |
| Homecast CoLtd |
EV Advanced and Homecast CoLtd Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with EV Advanced and Homecast CoLtd
The main advantage of trading using opposite EV Advanced and Homecast CoLtd positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if EV Advanced position performs unexpectedly, Homecast CoLtd can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Homecast CoLtd will offset losses from the drop in Homecast CoLtd's long position.| EV Advanced vs. Dongsin Engineering Construction | EV Advanced vs. Doosan Fuel Cell | EV Advanced vs. Daishin Balance 1 | EV Advanced vs. Total Soft Bank |
| Homecast CoLtd vs. Dongsin Engineering Construction | Homecast CoLtd vs. Doosan Fuel Cell | Homecast CoLtd vs. Daishin Balance 1 | Homecast CoLtd vs. Total Soft Bank |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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