Correlation Between Top Material and ED Co
Can any of the company-specific risk be diversified away by investing in both Top Material and ED Co 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 Top Material and ED Co into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Top Material Co and ED Co, you can compare the effects of market volatilities on Top Material and ED Co 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 Top Material with a short position of ED Co. Check out your portfolio center. Please also check ongoing floating volatility patterns of Top Material and ED Co.
Diversification Opportunities for Top Material and ED Co
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Top and 101360 is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Top Material Co and ED Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ED Co and Top Material 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 Top Material Co are associated (or correlated) with ED Co. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ED Co has no effect on the direction of Top Material i.e., Top Material and ED Co go up and down completely randomly.
Pair Corralation between Top Material and ED Co
Assuming the 90 days trading horizon Top Material Co is expected to under-perform the ED Co. But the stock apears to be less risky and, when comparing its historical volatility, Top Material Co is 1.46 times less risky than ED Co. The stock trades about -0.06 of its potential returns per unit of risk. The ED Co is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 3,072,029 in ED Co on September 12, 2024 and sell it today you would lose (682,029) from holding ED Co or give up 22.2% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 99.71% |
| Values | Daily Returns |
Top Material Co vs. ED Co
Performance |
| Timeline |
| Top Material |
| ED Co |
Top Material and ED Co Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Top Material and ED Co
The main advantage of trading using opposite Top Material and ED Co positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Top Material position performs unexpectedly, ED Co 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 ED Co will offset losses from the drop in ED Co's long position.| Top Material vs. Samsung Electronics Co | Top Material vs. Samsung Electronics Co | Top Material vs. LG Energy Solution | Top Material vs. SK Hynix |
| ED Co vs. DB Financial Investment | ED Co vs. Pureun Mutual Savings | ED Co vs. Sungwoo Electronics Co | ED Co vs. QUALITAS SEMICONDUCTOR LTD |
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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.
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