Correlation Between Credit Clear and EP Financial
Can any of the company-specific risk be diversified away by investing in both Credit Clear 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 Credit Clear and EP Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Credit Clear and EP Financial Group, you can compare the effects of market volatilities on Credit Clear 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 Credit Clear with a short position of EP Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Credit Clear and EP Financial.
Diversification Opportunities for Credit Clear and EP Financial
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Credit and EP1 is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Credit Clear 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 Credit Clear 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 Credit Clear 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 Credit Clear i.e., Credit Clear and EP Financial go up and down completely randomly.
Pair Corralation between Credit Clear and EP Financial
Assuming the 90 days trading horizon Credit Clear is expected to generate 0.94 times more return on investment than EP Financial. However, Credit Clear is 1.07 times less risky than EP Financial. It trades about 0.1 of its potential returns per unit of risk. EP Financial Group is currently generating about 0.04 per unit of risk. If you would invest 24.00 in Credit Clear on August 24, 2024 and sell it today you would earn a total of 11.00 from holding Credit Clear or generate 45.83% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Credit Clear vs. EP Financial Group
Performance |
| Timeline |
| Credit Clear |
| EP Financial Group |
Credit Clear and EP Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Credit Clear and EP Financial
The main advantage of trading using opposite Credit Clear and EP Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Credit Clear 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.| Credit Clear vs. Aneka Tambang Tbk | Credit Clear vs. Macquarie Group | Credit Clear vs. Macquarie Group Ltd | Credit Clear vs. Rio Tinto |
| EP Financial vs. Summit Resources Limited | EP Financial vs. Champion Iron | EP Financial vs. Peel Mining | EP Financial vs. Australian Dairy Farms |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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