Correlation Between East Africa and El Puerto
Can any of the company-specific risk be diversified away by investing in both East Africa and El Puerto 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 East Africa and El Puerto into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between East Africa Metals and El Puerto de, you can compare the effects of market volatilities on East Africa and El Puerto 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 East Africa with a short position of El Puerto. Check out your portfolio center. Please also check ongoing floating volatility patterns of East Africa and El Puerto.
Diversification Opportunities for East Africa and El Puerto
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between East and ELPQF is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding East Africa Metals and El Puerto de in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on El Puerto de and East Africa 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 East Africa Metals are associated (or correlated) with El Puerto. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of El Puerto de has no effect on the direction of East Africa i.e., East Africa and El Puerto go up and down completely randomly.
Pair Corralation between East Africa and El Puerto
Assuming the 90 days horizon East Africa Metals is expected to generate 11.14 times more return on investment than El Puerto. However, East Africa is 11.14 times more volatile than El Puerto de. It trades about 0.07 of its potential returns per unit of risk. El Puerto de is currently generating about -0.15 per unit of risk. If you would invest 6.26 in East Africa Metals on August 30, 2024 and sell it today you would earn a total of 4.74 from holding East Africa Metals or generate 75.72% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
East Africa Metals vs. El Puerto de
Performance |
| Timeline |
| East Africa Metals |
| El Puerto de |
East Africa and El Puerto Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with East Africa and El Puerto
The main advantage of trading using opposite East Africa and El Puerto positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if East Africa position performs unexpectedly, El Puerto 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 El Puerto will offset losses from the drop in El Puerto's long position.| East Africa vs. Silver Hammer Mining | East Africa vs. Reyna Silver Corp | East Africa vs. Guanajuato Silver | East Africa vs. Silver One Resources |
| El Puerto vs. Nordstrom | El Puerto vs. Macys Inc | El Puerto vs. Dillards Capital Trust | El Puerto vs. Kohls Corp |
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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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