Correlation Between EROAD and Microequities Asset
Can any of the company-specific risk be diversified away by investing in both EROAD and Microequities Asset 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 Microequities Asset into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between EROAD and Microequities Asset Management, you can compare the effects of market volatilities on EROAD and Microequities Asset 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 Microequities Asset. Check out your portfolio center. Please also check ongoing floating volatility patterns of EROAD and Microequities Asset.
Diversification Opportunities for EROAD and Microequities Asset
0.19 | Correlation Coefficient |
Average diversification
The 3 months correlation between EROAD and Microequities is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding EROAD and Microequities Asset Management in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Microequities Asset 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 Microequities Asset. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Microequities Asset has no effect on the direction of EROAD i.e., EROAD and Microequities Asset go up and down completely randomly.
Pair Corralation between EROAD and Microequities Asset
Assuming the 90 days trading horizon EROAD is expected to generate 0.92 times more return on investment than Microequities Asset. However, EROAD is 1.09 times less risky than Microequities Asset. It trades about 0.14 of its potential returns per unit of risk. Microequities Asset Management is currently generating about -0.03 per unit of risk. If you would invest 79.00 in EROAD on August 29, 2024 and sell it today you would earn a total of 5.00 from holding EROAD or generate 6.33% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
EROAD vs. Microequities Asset Management
Performance |
| Timeline |
| EROAD |
| Microequities Asset |
EROAD and Microequities Asset Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with EROAD and Microequities Asset
The main advantage of trading using opposite EROAD and Microequities Asset positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if EROAD position performs unexpectedly, Microequities Asset 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 Microequities Asset will offset losses from the drop in Microequities Asset's long position.| EROAD vs. Navigator Global Investments | EROAD vs. Super Retail Group | EROAD vs. Regal Investment | EROAD vs. Australian United Investment |
| Microequities Asset vs. National Australia Bank | Microequities Asset vs. National Australia Bank | Microequities Asset vs. Westpac Banking | Microequities Asset vs. National Australia 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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