Correlation Between ECHO INVESTMENT and JAPAN TOBACCO
Can any of the company-specific risk be diversified away by investing in both ECHO INVESTMENT and JAPAN TOBACCO 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 ECHO INVESTMENT and JAPAN TOBACCO into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ECHO INVESTMENT ZY and JAPAN TOBACCO UNSPADR12, you can compare the effects of market volatilities on ECHO INVESTMENT and JAPAN TOBACCO 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 ECHO INVESTMENT with a short position of JAPAN TOBACCO. Check out your portfolio center. Please also check ongoing floating volatility patterns of ECHO INVESTMENT and JAPAN TOBACCO.
Diversification Opportunities for ECHO INVESTMENT and JAPAN TOBACCO
-0.38 | Correlation Coefficient |
Very good diversification
The 3 months correlation between ECHO and JAPAN is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding ECHO INVESTMENT ZY and JAPAN TOBACCO UNSPADR12 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JAPAN TOBACCO UNSPADR12 and ECHO INVESTMENT 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 ECHO INVESTMENT ZY are associated (or correlated) with JAPAN TOBACCO. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JAPAN TOBACCO UNSPADR12 has no effect on the direction of ECHO INVESTMENT i.e., ECHO INVESTMENT and JAPAN TOBACCO go up and down completely randomly.
Pair Corralation between ECHO INVESTMENT and JAPAN TOBACCO
Assuming the 90 days horizon ECHO INVESTMENT ZY is expected to generate 1.47 times more return on investment than JAPAN TOBACCO. However, ECHO INVESTMENT is 1.47 times more volatile than JAPAN TOBACCO UNSPADR12. It trades about 0.05 of its potential returns per unit of risk. JAPAN TOBACCO UNSPADR12 is currently generating about 0.06 per unit of risk. If you would invest 70.00 in ECHO INVESTMENT ZY on September 1, 2024 and sell it today you would earn a total of 30.00 from holding ECHO INVESTMENT ZY or generate 42.86% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
ECHO INVESTMENT ZY vs. JAPAN TOBACCO UNSPADR12
Performance |
| Timeline |
| ECHO INVESTMENT ZY |
| JAPAN TOBACCO UNSPADR12 |
ECHO INVESTMENT and JAPAN TOBACCO Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ECHO INVESTMENT and JAPAN TOBACCO
The main advantage of trading using opposite ECHO INVESTMENT and JAPAN TOBACCO positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ECHO INVESTMENT position performs unexpectedly, JAPAN TOBACCO 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 JAPAN TOBACCO will offset losses from the drop in JAPAN TOBACCO's long position.| ECHO INVESTMENT vs. OPEN HOUSE GROUP | ECHO INVESTMENT vs. Superior Plus Corp | ECHO INVESTMENT vs. NMI Holdings | ECHO INVESTMENT vs. Origin Agritech |
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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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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