Correlation Between El Paso and Cadiz Depositary
Can any of the company-specific risk be diversified away by investing in both El Paso and Cadiz Depositary 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 El Paso and Cadiz Depositary into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between El Paso Energy and Cadiz Depositary Shares, you can compare the effects of market volatilities on El Paso and Cadiz Depositary 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 El Paso with a short position of Cadiz Depositary. Check out your portfolio center. Please also check ongoing floating volatility patterns of El Paso and Cadiz Depositary.
Diversification Opportunities for El Paso and Cadiz Depositary
0.22 | Correlation Coefficient |
Modest diversification
The 3 months correlation between EP-PC and Cadiz is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding El Paso Energy and Cadiz Depositary Shares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cadiz Depositary Shares and El Paso 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 El Paso Energy are associated (or correlated) with Cadiz Depositary. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cadiz Depositary Shares has no effect on the direction of El Paso i.e., El Paso and Cadiz Depositary go up and down completely randomly.
Pair Corralation between El Paso and Cadiz Depositary
Assuming the 90 days horizon El Paso is expected to generate 3.75 times less return on investment than Cadiz Depositary. But when comparing it to its historical volatility, El Paso Energy is 1.85 times less risky than Cadiz Depositary. It trades about 0.11 of its potential returns per unit of risk. Cadiz Depositary Shares is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest 1,470 in Cadiz Depositary Shares on August 28, 2024 and sell it today you would earn a total of 166.00 from holding Cadiz Depositary Shares or generate 11.29% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
El Paso Energy vs. Cadiz Depositary Shares
Performance |
| Timeline |
| El Paso Energy |
| Cadiz Depositary Shares |
El Paso and Cadiz Depositary Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with El Paso and Cadiz Depositary
The main advantage of trading using opposite El Paso and Cadiz Depositary positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if El Paso position performs unexpectedly, Cadiz Depositary 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 Cadiz Depositary will offset losses from the drop in Cadiz Depositary's long position.The idea behind El Paso Energy and Cadiz Depositary Shares 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.| Cadiz Depositary vs. Atlanticus Holdings Corp | Cadiz Depositary vs. LifeMD Preferred Series | Cadiz Depositary vs. Aquagold International | Cadiz Depositary vs. Morningstar Unconstrained Allocation |
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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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