Correlation Between Everyday People and Western Investment
Can any of the company-specific risk be diversified away by investing in both Everyday People and Western Investment 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 Everyday People and Western Investment into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Everyday People Financial and Western Investment, you can compare the effects of market volatilities on Everyday People and Western Investment 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 Everyday People with a short position of Western Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Everyday People and Western Investment.
Diversification Opportunities for Everyday People and Western Investment
0.08 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Everyday and Western is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Everyday People Financial and Western Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Investment and Everyday People 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 Everyday People Financial are associated (or correlated) with Western Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Western Investment has no effect on the direction of Everyday People i.e., Everyday People and Western Investment go up and down completely randomly.
Pair Corralation between Everyday People and Western Investment
Assuming the 90 days horizon Everyday People Financial is expected to generate 1.62 times more return on investment than Western Investment. However, Everyday People is 1.62 times more volatile than Western Investment. It trades about 0.04 of its potential returns per unit of risk. Western Investment is currently generating about 0.03 per unit of risk. If you would invest 30.00 in Everyday People Financial on September 5, 2024 and sell it today you would earn a total of 11.00 from holding Everyday People Financial or generate 36.67% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Everyday People Financial vs. Western Investment
Performance |
| Timeline |
| Everyday People Financial |
| Western Investment |
Everyday People and Western Investment Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Everyday People and Western Investment
The main advantage of trading using opposite Everyday People and Western Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Everyday People position performs unexpectedly, Western Investment 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 Western Investment will offset losses from the drop in Western Investment's long position.| Everyday People vs. Slate Grocery REIT | Everyday People vs. Roots Corp | Everyday People vs. Aimia Inc | Everyday People vs. Morguard Real Estate |
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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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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