Correlation Between ETC On and ETC Group
Can any of the company-specific risk be diversified away by investing in both ETC On and ETC Group 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 ETC On and ETC Group into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ETC on CMCI and ETC Group Global, you can compare the effects of market volatilities on ETC On and ETC Group 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 ETC On with a short position of ETC Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of ETC On and ETC Group.
Diversification Opportunities for ETC On and ETC Group
Good diversification
The 3 months correlation between ETC and ETC is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding ETC on CMCI and ETC Group Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ETC Group Global and ETC On 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 ETC on CMCI are associated (or correlated) with ETC Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ETC Group Global has no effect on the direction of ETC On i.e., ETC On and ETC Group go up and down completely randomly.
Pair Corralation between ETC On and ETC Group
Assuming the 90 days trading horizon ETC On is expected to generate 6.64 times less return on investment than ETC Group. But when comparing it to its historical volatility, ETC on CMCI is 3.62 times less risky than ETC Group. It trades about 0.23 of its potential returns per unit of risk. ETC Group Global is currently generating about 0.43 of returns per unit of risk over similar time horizon. If you would invest 81,705 in ETC Group Global on September 3, 2024 and sell it today you would earn a total of 15,395 from holding ETC Group Global or generate 18.84% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
ETC on CMCI vs. ETC Group Global
Performance |
| Timeline |
| ETC on CMCI |
| ETC Group Global |
ETC On and ETC Group Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ETC On and ETC Group
The main advantage of trading using opposite ETC On and ETC Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ETC On position performs unexpectedly, ETC Group 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 ETC Group will offset losses from the drop in ETC Group's long position.| ETC On vs. Scottish Mortgage Investment | ETC On vs. VinaCapital Vietnam Opportunity | ETC On vs. Edinburgh Worldwide Investment | ETC On vs. Baillie Gifford Growth |
| ETC Group vs. ETC on CMCI | ETC Group vs. ETC on CMCI | ETC Group vs. ETC on CMCI | ETC Group vs. ETC Group Global |
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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.
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