Correlation Between EP Financial and Collins Foods
Can any of the company-specific risk be diversified away by investing in both EP Financial and Collins Foods 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 EP Financial and Collins Foods into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between EP Financial Group and Collins Foods, you can compare the effects of market volatilities on EP Financial and Collins Foods 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 EP Financial with a short position of Collins Foods. Check out your portfolio center. Please also check ongoing floating volatility patterns of EP Financial and Collins Foods.
Diversification Opportunities for EP Financial and Collins Foods
0.55 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between EP1 and Collins is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding EP Financial Group and Collins Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Collins Foods and EP Financial 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 EP Financial Group are associated (or correlated) with Collins Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Collins Foods has no effect on the direction of EP Financial i.e., EP Financial and Collins Foods go up and down completely randomly.
Pair Corralation between EP Financial and Collins Foods
Assuming the 90 days trading horizon EP Financial Group is expected to generate 1.81 times more return on investment than Collins Foods. However, EP Financial is 1.81 times more volatile than Collins Foods. It trades about 0.06 of its potential returns per unit of risk. Collins Foods is currently generating about -0.01 per unit of risk. If you would invest 43.00 in EP Financial Group on August 31, 2024 and sell it today you would earn a total of 9.00 from holding EP Financial Group or generate 20.93% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
EP Financial Group vs. Collins Foods
Performance |
| Timeline |
| EP Financial Group |
| Collins Foods |
EP Financial and Collins Foods Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with EP Financial and Collins Foods
The main advantage of trading using opposite EP Financial and Collins Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if EP Financial position performs unexpectedly, Collins Foods 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 Collins Foods will offset losses from the drop in Collins Foods' long position.| EP Financial vs. Energy Resources | EP Financial vs. 88 Energy | EP Financial vs. Amani Gold | EP Financial vs. A1 Investments Resources |
| Collins Foods vs. Aneka Tambang Tbk | Collins Foods vs. Unibail Rodamco Westfield SE | Collins Foods vs. Macquarie Group | Collins Foods vs. Commonwealth Bank |
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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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