Correlation Between Environmental and Hammer Metals
Can any of the company-specific risk be diversified away by investing in both Environmental and Hammer Metals 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 Environmental and Hammer Metals into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between The Environmental Group and Hammer Metals, you can compare the effects of market volatilities on Environmental and Hammer Metals 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 Environmental with a short position of Hammer Metals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Environmental and Hammer Metals.
Diversification Opportunities for Environmental and Hammer Metals
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Environmental and Hammer is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding The Environmental Group and Hammer Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hammer Metals and Environmental 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 The Environmental Group are associated (or correlated) with Hammer Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hammer Metals has no effect on the direction of Environmental i.e., Environmental and Hammer Metals go up and down completely randomly.
Pair Corralation between Environmental and Hammer Metals
Assuming the 90 days trading horizon The Environmental Group is expected to generate 0.7 times more return on investment than Hammer Metals. However, The Environmental Group is 1.42 times less risky than Hammer Metals. It trades about 0.05 of its potential returns per unit of risk. Hammer Metals is currently generating about -0.09 per unit of risk. If you would invest 27.00 in The Environmental Group on October 30, 2024 and sell it today you would earn a total of 1.00 from holding The Environmental Group or generate 3.7% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
The Environmental Group vs. Hammer Metals
Performance |
| Timeline |
| The Environmental |
| Hammer Metals |
Environmental and Hammer Metals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Environmental and Hammer Metals
The main advantage of trading using opposite Environmental and Hammer Metals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Environmental position performs unexpectedly, Hammer Metals 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 Hammer Metals will offset losses from the drop in Hammer Metals' long position.| Environmental vs. Sky Metals | Environmental vs. Aurelia Metals | Environmental vs. Stelar Metals | Environmental vs. Dalaroo Metals |
| Hammer Metals vs. Macquarie Technology Group | Hammer Metals vs. Dalaroo Metals | Hammer Metals vs. Super Retail Group | Hammer Metals vs. Computershare |
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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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