Correlation Between Energy Technologies and Mayfield Childcare
Can any of the company-specific risk be diversified away by investing in both Energy Technologies and Mayfield Childcare 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 Energy Technologies and Mayfield Childcare into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Energy Technologies Limited and Mayfield Childcare, you can compare the effects of market volatilities on Energy Technologies and Mayfield Childcare 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 Energy Technologies with a short position of Mayfield Childcare. Check out your portfolio center. Please also check ongoing floating volatility patterns of Energy Technologies and Mayfield Childcare.
Diversification Opportunities for Energy Technologies and Mayfield Childcare
0.46 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Energy and Mayfield is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Energy Technologies Limited and Mayfield Childcare in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mayfield Childcare and Energy Technologies 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 Energy Technologies Limited are associated (or correlated) with Mayfield Childcare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mayfield Childcare has no effect on the direction of Energy Technologies i.e., Energy Technologies and Mayfield Childcare go up and down completely randomly.
Pair Corralation between Energy Technologies and Mayfield Childcare
Assuming the 90 days trading horizon Energy Technologies Limited is expected to generate 0.97 times more return on investment than Mayfield Childcare. However, Energy Technologies Limited is 1.03 times less risky than Mayfield Childcare. It trades about -0.02 of its potential returns per unit of risk. Mayfield Childcare is currently generating about -0.02 per unit of risk. If you would invest 3.80 in Energy Technologies Limited on August 25, 2024 and sell it today you would lose (0.70) from holding Energy Technologies Limited or give up 18.42% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Energy Technologies Limited vs. Mayfield Childcare
Performance |
| Timeline |
| Energy Technologies |
| Mayfield Childcare |
Energy Technologies and Mayfield Childcare Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Energy Technologies and Mayfield Childcare
The main advantage of trading using opposite Energy Technologies and Mayfield Childcare positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Energy Technologies position performs unexpectedly, Mayfield Childcare 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 Mayfield Childcare will offset losses from the drop in Mayfield Childcare's long position.| Energy Technologies vs. Alto Metals | Energy Technologies vs. Aurelia Metals | Energy Technologies vs. Bluescope Steel | Energy Technologies vs. Hotel Property Investments |
| Mayfield Childcare vs. PVW Resources | Mayfield Childcare vs. Woolworths | Mayfield Childcare vs. Wesfarmers | Mayfield Childcare vs. Coles Group |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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