Correlation Between ECGI Holdings and Aris Water
Can any of the company-specific risk be diversified away by investing in both ECGI Holdings and Aris Water 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 ECGI Holdings and Aris Water into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ECGI Holdings and Aris Water Solutions, you can compare the effects of market volatilities on ECGI Holdings and Aris Water 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 ECGI Holdings with a short position of Aris Water. Check out your portfolio center. Please also check ongoing floating volatility patterns of ECGI Holdings and Aris Water.
Diversification Opportunities for ECGI Holdings and Aris Water
-0.33 | Correlation Coefficient |
Very good diversification
The 3 months correlation between ECGI and Aris is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding ECGI Holdings and Aris Water Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aris Water Solutions and ECGI Holdings 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 ECGI Holdings are associated (or correlated) with Aris Water. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aris Water Solutions has no effect on the direction of ECGI Holdings i.e., ECGI Holdings and Aris Water go up and down completely randomly.
Pair Corralation between ECGI Holdings and Aris Water
Given the investment horizon of 90 days ECGI Holdings is expected to generate 3.73 times more return on investment than Aris Water. However, ECGI Holdings is 3.73 times more volatile than Aris Water Solutions. It trades about 0.04 of its potential returns per unit of risk. Aris Water Solutions is currently generating about 0.13 per unit of risk. If you would invest 0.22 in ECGI Holdings on September 3, 2024 and sell it today you would lose (0.11) from holding ECGI Holdings or give up 50.0% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
ECGI Holdings vs. Aris Water Solutions
Performance |
| Timeline |
| ECGI Holdings |
| Aris Water Solutions |
ECGI Holdings and Aris Water Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ECGI Holdings and Aris Water
The main advantage of trading using opposite ECGI Holdings and Aris Water positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ECGI Holdings position performs unexpectedly, Aris Water 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 Aris Water will offset losses from the drop in Aris Water's long position.| ECGI Holdings vs. Senmiao Technology | ECGI Holdings vs. Reservoir Media | ECGI Holdings vs. Cedar Realty Trust | ECGI Holdings vs. PennantPark Floating Rate |
| Aris Water vs. Middlesex Water | Aris Water vs. California Water Service | Aris Water vs. Global Water Resources | Aris Water vs. American States Water |
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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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