Correlation Between EROAD and Wam Capital
Can any of the company-specific risk be diversified away by investing in both EROAD and Wam Capital 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 Wam Capital into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between EROAD and Wam Capital, you can compare the effects of market volatilities on EROAD and Wam Capital 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 Wam Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of EROAD and Wam Capital.
Diversification Opportunities for EROAD and Wam Capital
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between EROAD and Wam is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding EROAD and Wam Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wam Capital 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 Wam Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wam Capital has no effect on the direction of EROAD i.e., EROAD and Wam Capital go up and down completely randomly.
Pair Corralation between EROAD and Wam Capital
Assuming the 90 days trading horizon EROAD is expected to generate 4.22 times more return on investment than Wam Capital. However, EROAD is 4.22 times more volatile than Wam Capital. It trades about 0.07 of its potential returns per unit of risk. Wam Capital is currently generating about 0.14 per unit of risk. If you would invest 95.00 in EROAD on November 1, 2024 and sell it today you would earn a total of 3.00 from holding EROAD or generate 3.16% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 95.24% |
| Values | Daily Returns |
EROAD vs. Wam Capital
Performance |
| Timeline |
| EROAD |
| Wam Capital |
EROAD and Wam Capital Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with EROAD and Wam Capital
The main advantage of trading using opposite EROAD and Wam Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if EROAD position performs unexpectedly, Wam Capital 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 Wam Capital will offset losses from the drop in Wam Capital's long position.| EROAD vs. Charter Hall Retail | EROAD vs. ACDC Metals | EROAD vs. Super Retail Group | EROAD vs. Hutchison Telecommunications |
| Wam Capital vs. Infomedia | Wam Capital vs. EROAD | Wam Capital vs. COAST ENTERTAINMENT HOLDINGS | Wam Capital vs. Truscott Mining Corp |
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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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