Correlation Between Environmental and Lottery
Can any of the company-specific risk be diversified away by investing in both Environmental and Lottery 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 Lottery 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 Lottery, you can compare the effects of market volatilities on Environmental and Lottery 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 Lottery. Check out your portfolio center. Please also check ongoing floating volatility patterns of Environmental and Lottery.
Diversification Opportunities for Environmental and Lottery
-0.38 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Environmental and Lottery is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding The Environmental Group and Lottery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lottery 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 Lottery. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lottery has no effect on the direction of Environmental i.e., Environmental and Lottery go up and down completely randomly.
Pair Corralation between Environmental and Lottery
Assuming the 90 days trading horizon The Environmental Group is expected to generate 2.95 times more return on investment than Lottery. However, Environmental is 2.95 times more volatile than Lottery. It trades about 0.04 of its potential returns per unit of risk. Lottery is currently generating about 0.03 per unit of risk. If you would invest 19.00 in The Environmental Group on September 3, 2024 and sell it today you would earn a total of 8.00 from holding The Environmental Group or generate 42.11% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
The Environmental Group vs. Lottery
Performance |
| Timeline |
| The Environmental |
| Lottery |
Environmental and Lottery Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Environmental and Lottery
The main advantage of trading using opposite Environmental and Lottery positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Environmental position performs unexpectedly, Lottery 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 Lottery will offset losses from the drop in Lottery's long position.| Environmental vs. Jupiter Energy | Environmental vs. WA1 Resources | Environmental vs. Predictive Discovery | Environmental vs. Cooper Metals |
| Lottery vs. Charter Hall Education | Lottery vs. Dexus Convenience Retail | Lottery vs. Sky Metals | Lottery vs. Kip McGrath Education |
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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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