Correlation Between EROAD and Clime Investment
Can any of the company-specific risk be diversified away by investing in both EROAD and Clime 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 EROAD and Clime Investment into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between EROAD and Clime Investment Management, you can compare the effects of market volatilities on EROAD and Clime 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 EROAD with a short position of Clime Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of EROAD and Clime Investment.
Diversification Opportunities for EROAD and Clime Investment
-0.54 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between EROAD and Clime is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding EROAD and Clime Investment Management in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Clime Investment Man and EROAD 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 EROAD are associated (or correlated) with Clime Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Clime Investment Man has no effect on the direction of EROAD i.e., EROAD and Clime Investment go up and down completely randomly.
Pair Corralation between EROAD and Clime Investment
Assuming the 90 days trading horizon EROAD is expected to generate 2.22 times more return on investment than Clime Investment. However, EROAD is 2.22 times more volatile than Clime Investment Management. It trades about 0.02 of its potential returns per unit of risk. Clime Investment Management is currently generating about -0.02 per unit of risk. If you would invest 92.00 in EROAD on August 29, 2024 and sell it today you would lose (9.00) from holding EROAD or give up 9.78% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
EROAD vs. Clime Investment Management
Performance |
| Timeline |
| EROAD |
| Clime Investment Man |
EROAD and Clime Investment Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with EROAD and Clime Investment
The main advantage of trading using opposite EROAD and Clime Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if EROAD position performs unexpectedly, Clime 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 Clime Investment will offset losses from the drop in Clime Investment's long position.The idea behind EROAD and Clime Investment Management 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.| Clime Investment vs. Champion Iron | Clime Investment vs. Ridley | Clime Investment vs. Peel Mining | Clime Investment vs. Australian Dairy Farms |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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