Correlation Between EP Financial and Future Generation
Can any of the company-specific risk be diversified away by investing in both EP Financial and Future Generation 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 Future Generation 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 Future Generation Australia, you can compare the effects of market volatilities on EP Financial and Future Generation 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 Future Generation. Check out your portfolio center. Please also check ongoing floating volatility patterns of EP Financial and Future Generation.
Diversification Opportunities for EP Financial and Future Generation
0.31 | Correlation Coefficient |
Weak diversification
The 3 months correlation between EP1 and Future is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding EP Financial Group and Future Generation Australia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Future Generation 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 Future Generation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Future Generation has no effect on the direction of EP Financial i.e., EP Financial and Future Generation go up and down completely randomly.
Pair Corralation between EP Financial and Future Generation
Assuming the 90 days trading horizon EP Financial Group is expected to generate 2.8 times more return on investment than Future Generation. However, EP Financial is 2.8 times more volatile than Future Generation Australia. It trades about 0.15 of its potential returns per unit of risk. Future Generation Australia is currently generating about 0.23 per unit of risk. If you would invest 48.00 in EP Financial Group on September 1, 2024 and sell it today you would earn a total of 4.00 from holding EP Financial Group or generate 8.33% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
EP Financial Group vs. Future Generation Australia
Performance |
| Timeline |
| EP Financial Group |
| Future Generation |
EP Financial and Future Generation Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with EP Financial and Future Generation
The main advantage of trading using opposite EP Financial and Future Generation positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if EP Financial position performs unexpectedly, Future Generation 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 Future Generation will offset losses from the drop in Future Generation's long position.| EP Financial vs. Navigator Global Investments | EP Financial vs. Collins Foods | EP Financial vs. Hotel Property Investments | EP Financial vs. Queste Communications |
| Future Generation vs. Credit Clear | Future Generation vs. RLF AgTech | Future Generation vs. Commonwealth Bank of | Future Generation vs. EP Financial 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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