Correlation Between Clime Investment and EROAD
Can any of the company-specific risk be diversified away by investing in both Clime Investment and EROAD 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 Clime Investment and EROAD into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Clime Investment Management and EROAD, you can compare the effects of market volatilities on Clime Investment and EROAD 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 Clime Investment with a short position of EROAD. Check out your portfolio center. Please also check ongoing floating volatility patterns of Clime Investment and EROAD.
Diversification Opportunities for Clime Investment and EROAD
-0.54 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Clime and EROAD is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Clime Investment Management and EROAD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EROAD and Clime Investment 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 Clime Investment Management are associated (or correlated) with EROAD. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EROAD has no effect on the direction of Clime Investment i.e., Clime Investment and EROAD go up and down completely randomly.
Pair Corralation between Clime Investment and EROAD
Assuming the 90 days trading horizon Clime Investment Management is expected to generate 0.71 times more return on investment than EROAD. However, Clime Investment Management is 1.41 times less risky than EROAD. It trades about 0.01 of its potential returns per unit of risk. EROAD is currently generating about -0.02 per unit of risk. If you would invest 35.00 in Clime Investment Management on August 29, 2024 and sell it today you would earn a total of 0.00 from holding Clime Investment Management or generate 0.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Clime Investment Management vs. EROAD
Performance |
| Timeline |
| Clime Investment Man |
| EROAD |
Clime Investment and EROAD Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Clime Investment and EROAD
The main advantage of trading using opposite Clime Investment and EROAD positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Clime Investment position performs unexpectedly, EROAD 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 EROAD will offset losses from the drop in EROAD's long position.| Clime Investment vs. Champion Iron | Clime Investment vs. Ridley | Clime Investment vs. Peel Mining | Clime Investment 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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