Correlation Between Escalade Incorporated and Century Communities
Can any of the company-specific risk be diversified away by investing in both Escalade Incorporated and Century Communities 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 Escalade Incorporated and Century Communities into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Escalade Incorporated and Century Communities, you can compare the effects of market volatilities on Escalade Incorporated and Century Communities 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 Escalade Incorporated with a short position of Century Communities. Check out your portfolio center. Please also check ongoing floating volatility patterns of Escalade Incorporated and Century Communities.
Diversification Opportunities for Escalade Incorporated and Century Communities
-0.47 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Escalade and Century is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Escalade Incorporated and Century Communities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Century Communities and Escalade Incorporated 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 Escalade Incorporated are associated (or correlated) with Century Communities. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Century Communities has no effect on the direction of Escalade Incorporated i.e., Escalade Incorporated and Century Communities go up and down completely randomly.
Pair Corralation between Escalade Incorporated and Century Communities
Given the investment horizon of 90 days Escalade Incorporated is expected to generate 1.34 times more return on investment than Century Communities. However, Escalade Incorporated is 1.34 times more volatile than Century Communities. It trades about 0.1 of its potential returns per unit of risk. Century Communities is currently generating about 0.04 per unit of risk. If you would invest 1,414 in Escalade Incorporated on August 30, 2024 and sell it today you would earn a total of 85.00 from holding Escalade Incorporated or generate 6.01% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
Escalade Incorporated vs. Century Communities
Performance |
| Timeline |
| Escalade Incorporated |
| Century Communities |
Escalade Incorporated and Century Communities Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Escalade Incorporated and Century Communities
The main advantage of trading using opposite Escalade Incorporated and Century Communities positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Escalade Incorporated position performs unexpectedly, Century Communities 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 Century Communities will offset losses from the drop in Century Communities' long position.| Escalade Incorporated vs. Johnson Outdoors | Escalade Incorporated vs. First Business Financial | Escalade Incorporated vs. Flexsteel Industries | Escalade Incorporated vs. Superior Uniform Group |
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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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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