Correlation Between Europac International and Ep Emerging
Can any of the company-specific risk be diversified away by investing in both Europac International and Ep Emerging 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 Europac International and Ep Emerging into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Europac International Bond and Ep Emerging Markets, you can compare the effects of market volatilities on Europac International and Ep Emerging 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 Europac International with a short position of Ep Emerging. Check out your portfolio center. Please also check ongoing floating volatility patterns of Europac International and Ep Emerging.
Diversification Opportunities for Europac International and Ep Emerging
0.34 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Europac and EPEIX is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Europac International Bond and Ep Emerging Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ep Emerging Markets and Europac International 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 Europac International Bond are associated (or correlated) with Ep Emerging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ep Emerging Markets has no effect on the direction of Europac International i.e., Europac International and Ep Emerging go up and down completely randomly.
Pair Corralation between Europac International and Ep Emerging
Assuming the 90 days horizon Europac International is expected to generate 8.06 times less return on investment than Ep Emerging. But when comparing it to its historical volatility, Europac International Bond is 2.47 times less risky than Ep Emerging. It trades about 0.01 of its potential returns per unit of risk. Ep Emerging Markets is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 960.00 in Ep Emerging Markets on August 26, 2024 and sell it today you would earn a total of 58.00 from holding Ep Emerging Markets or generate 6.04% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Europac International Bond vs. Ep Emerging Markets
Performance |
| Timeline |
| Europac International |
| Ep Emerging Markets |
Europac International and Ep Emerging Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Europac International and Ep Emerging
The main advantage of trading using opposite Europac International and Ep Emerging positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Europac International position performs unexpectedly, Ep Emerging 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 Ep Emerging will offset losses from the drop in Ep Emerging's long position.The idea behind Europac International Bond and Ep Emerging Markets 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.
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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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.
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