Correlation Between All American and Eco Tek
Can any of the company-specific risk be diversified away by investing in both All American and Eco Tek 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 All American and Eco Tek into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between All American Gld and Eco Tek Group, you can compare the effects of market volatilities on All American and Eco Tek 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 All American with a short position of Eco Tek. Check out your portfolio center. Please also check ongoing floating volatility patterns of All American and Eco Tek.
Diversification Opportunities for All American and Eco Tek
-0.2 | Correlation Coefficient |
Good diversification
The 3 months correlation between All and Eco is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding All American Gld and Eco Tek Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eco Tek Group and All American 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 All American Gld are associated (or correlated) with Eco Tek. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eco Tek Group has no effect on the direction of All American i.e., All American and Eco Tek go up and down completely randomly.
Pair Corralation between All American and Eco Tek
Given the investment horizon of 90 days All American is expected to generate 2.13 times less return on investment than Eco Tek. But when comparing it to its historical volatility, All American Gld is 1.76 times less risky than Eco Tek. It trades about 0.08 of its potential returns per unit of risk. Eco Tek Group is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 0.03 in Eco Tek Group on September 1, 2024 and sell it today you would lose (0.01) from holding Eco Tek Group or give up 33.33% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
All American Gld vs. Eco Tek Group
Performance |
| Timeline |
| All American Gld |
| Eco Tek Group |
All American and Eco Tek Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with All American and Eco Tek
The main advantage of trading using opposite All American and Eco Tek positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if All American position performs unexpectedly, Eco Tek 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 Eco Tek will offset losses from the drop in Eco Tek's long position.| All American vs. American Leisure Holdings | All American vs. Supurva Healthcare Group | All American vs. China Health Management | All American vs. Embrace Change Acquisition |
| Eco Tek vs. South32 Limited | Eco Tek vs. NioCorp Developments Ltd | Eco Tek vs. HUMANA INC | Eco Tek vs. SCOR PK |
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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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