Correlation Between Adriatic Metals and EP Financial
Can any of the company-specific risk be diversified away by investing in both Adriatic Metals and EP Financial 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 Adriatic Metals and EP Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Adriatic Metals Plc and EP Financial Group, you can compare the effects of market volatilities on Adriatic Metals and EP Financial 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 Adriatic Metals with a short position of EP Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Adriatic Metals and EP Financial.
Diversification Opportunities for Adriatic Metals and EP Financial
0.61 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Adriatic and EP1 is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Adriatic Metals Plc and EP Financial Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EP Financial Group and Adriatic Metals 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 Adriatic Metals Plc are associated (or correlated) with EP Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EP Financial Group has no effect on the direction of Adriatic Metals i.e., Adriatic Metals and EP Financial go up and down completely randomly.
Pair Corralation between Adriatic Metals and EP Financial
Assuming the 90 days trading horizon Adriatic Metals is expected to generate 2.16 times less return on investment than EP Financial. In addition to that, Adriatic Metals is 1.41 times more volatile than EP Financial Group. It trades about 0.09 of its total potential returns per unit of risk. EP Financial Group is currently generating about 0.26 per unit of volatility. If you would invest 47.00 in EP Financial Group on September 12, 2024 and sell it today you would earn a total of 5.00 from holding EP Financial Group or generate 10.64% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Adriatic Metals Plc vs. EP Financial Group
Performance |
| Timeline |
| Adriatic Metals Plc |
| EP Financial Group |
Adriatic Metals and EP Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Adriatic Metals and EP Financial
The main advantage of trading using opposite Adriatic Metals and EP Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Adriatic Metals position performs unexpectedly, EP Financial 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 EP Financial will offset losses from the drop in EP Financial's long position.| Adriatic Metals vs. Advanced Braking Technology | Adriatic Metals vs. BTC Health Limited | Adriatic Metals vs. Oneview Healthcare PLC | Adriatic Metals vs. Ramsay Health Care |
| EP Financial vs. Richmond Vanadium Technology | EP Financial vs. Cleanaway Waste Management | EP Financial vs. Global Health | EP Financial vs. Oceania Healthcare |
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 Transaction History module to view history of all your transactions and understand their impact on performance.
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