Correlation Between Ace Hardware and Equity Development
Can any of the company-specific risk be diversified away by investing in both Ace Hardware and Equity Development 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 Ace Hardware and Equity Development into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ace Hardware Indonesia and Equity Development Investment, you can compare the effects of market volatilities on Ace Hardware and Equity Development 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 Ace Hardware with a short position of Equity Development. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ace Hardware and Equity Development.
Diversification Opportunities for Ace Hardware and Equity Development
0.48 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Ace and Equity is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Ace Hardware Indonesia and Equity Development Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Equity Development and Ace Hardware 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 Ace Hardware Indonesia are associated (or correlated) with Equity Development. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Equity Development has no effect on the direction of Ace Hardware i.e., Ace Hardware and Equity Development go up and down completely randomly.
Pair Corralation between Ace Hardware and Equity Development
Assuming the 90 days trading horizon Ace Hardware Indonesia is expected to under-perform the Equity Development. But the stock apears to be less risky and, when comparing its historical volatility, Ace Hardware Indonesia is 1.53 times less risky than Equity Development. The stock trades about -0.32 of its potential returns per unit of risk. The Equity Development Investment is currently generating about -0.06 of returns per unit of risk over similar time horizon. If you would invest 5,900 in Equity Development Investment on August 30, 2024 and sell it today you would lose (300.00) from holding Equity Development Investment or give up 5.08% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ace Hardware Indonesia vs. Equity Development Investment
Performance |
| Timeline |
| Ace Hardware Indonesia |
| Equity Development |
Ace Hardware and Equity Development Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ace Hardware and Equity Development
The main advantage of trading using opposite Ace Hardware and Equity Development positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ace Hardware position performs unexpectedly, Equity Development 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 Equity Development will offset losses from the drop in Equity Development's long position.| Ace Hardware vs. Pembangunan Jaya Ancol | Ace Hardware vs. Panorama Sentrawisata Tbk | Ace Hardware vs. Millennium Pharmacon International | Ace Hardware vs. Tempo Inti Media |
| Equity Development vs. Pacific Strategic Financial | Equity Development vs. Asuransi Harta Aman | Equity Development vs. Buana Finance Tbk | Equity Development vs. Asuransi Bintang Tbk |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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