Correlation Between ECN Capital and Western Investment
Can any of the company-specific risk be diversified away by investing in both ECN Capital and Western Investment 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 ECN Capital and Western Investment into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ECN Capital Corp and Western Investment, you can compare the effects of market volatilities on ECN Capital and Western Investment 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 ECN Capital with a short position of Western Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of ECN Capital and Western Investment.
Diversification Opportunities for ECN Capital and Western Investment
-0.36 | Correlation Coefficient |
Very good diversification
The 3 months correlation between ECN and Western is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding ECN Capital Corp and Western Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Investment and ECN Capital 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 ECN Capital Corp are associated (or correlated) with Western Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Western Investment has no effect on the direction of ECN Capital i.e., ECN Capital and Western Investment go up and down completely randomly.
Pair Corralation between ECN Capital and Western Investment
Assuming the 90 days trading horizon ECN Capital Corp is expected to generate 2.98 times more return on investment than Western Investment. However, ECN Capital is 2.98 times more volatile than Western Investment. It trades about 0.27 of its potential returns per unit of risk. Western Investment is currently generating about -0.12 per unit of risk. If you would invest 220.00 in ECN Capital Corp on August 28, 2024 and sell it today you would earn a total of 71.00 from holding ECN Capital Corp or generate 32.27% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
ECN Capital Corp vs. Western Investment
Performance |
| Timeline |
| ECN Capital Corp |
| Western Investment |
ECN Capital and Western Investment Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ECN Capital and Western Investment
The main advantage of trading using opposite ECN Capital and Western Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ECN Capital position performs unexpectedly, Western Investment 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 Western Investment will offset losses from the drop in Western Investment's long position.| ECN Capital vs. Element Fleet Management | ECN Capital vs. Colliers International Group | ECN Capital vs. Altus Group Limited | ECN Capital vs. FirstService Corp |
| Western Investment vs. NVIDIA CDR | Western Investment vs. Apple Inc CDR | Western Investment vs. Microsoft Corp CDR | Western Investment vs. Amazon CDR |
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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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