Correlation Between EDP - and Tri-ContinentalPFD
Can any of the company-specific risk be diversified away by investing in both EDP - and Tri-ContinentalPFD 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 EDP - and Tri-ContinentalPFD into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between EDP Energias and Tri Continental PFD, you can compare the effects of market volatilities on EDP - and Tri-ContinentalPFD 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 EDP - with a short position of Tri-ContinentalPFD. Check out your portfolio center. Please also check ongoing floating volatility patterns of EDP - and Tri-ContinentalPFD.
Diversification Opportunities for EDP - and Tri-ContinentalPFD
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between EDP and Tri-ContinentalPFD is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding EDP Energias and Tri Continental PFD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tri Continental PFD and EDP - 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 EDP Energias are associated (or correlated) with Tri-ContinentalPFD. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tri Continental PFD has no effect on the direction of EDP - i.e., EDP - and Tri-ContinentalPFD go up and down completely randomly.
Pair Corralation between EDP - and Tri-ContinentalPFD
Assuming the 90 days horizon EDP Energias is expected to under-perform the Tri-ContinentalPFD. In addition to that, EDP - is 2.77 times more volatile than Tri Continental PFD. It trades about -0.14 of its total potential returns per unit of risk. Tri Continental PFD is currently generating about -0.07 per unit of volatility. If you would invest 4,690 in Tri Continental PFD on November 1, 2024 and sell it today you would lose (167.00) from holding Tri Continental PFD or give up 3.56% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
EDP Energias vs. Tri Continental PFD
Performance |
| Timeline |
| EDP Energias |
| Tri Continental PFD |
EDP - and Tri-ContinentalPFD Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with EDP - and Tri-ContinentalPFD
The main advantage of trading using opposite EDP - and Tri-ContinentalPFD positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if EDP - position performs unexpectedly, Tri-ContinentalPFD 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 Tri-ContinentalPFD will offset losses from the drop in Tri-ContinentalPFD's long position.The idea behind EDP Energias and Tri Continental PFD pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Tri-ContinentalPFD vs. The Gabelli Equity | Tri-ContinentalPFD vs. Virtus AllianzGI Convertible | Tri-ContinentalPFD vs. Oxford Lane Capital | Tri-ContinentalPFD vs. The Gabelli Utility |
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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