Correlation Between Economic Investment and New Zealand

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Can any of the company-specific risk be diversified away by investing in both Economic Investment and New Zealand 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 Economic Investment and New Zealand into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Economic Investment Trust and New Zealand Energy, you can compare the effects of market volatilities on Economic Investment and New Zealand 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 Economic Investment with a short position of New Zealand. Check out your portfolio center. Please also check ongoing floating volatility patterns of Economic Investment and New Zealand.

Diversification Opportunities for Economic Investment and New Zealand

-0.57
  Correlation Coefficient

Excellent diversification

The 3 months correlation between Economic and New is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding Economic Investment Trust and New Zealand Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on New Zealand Energy and Economic Investment 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 Economic Investment Trust are associated (or correlated) with New Zealand. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of New Zealand Energy has no effect on the direction of Economic Investment i.e., Economic Investment and New Zealand go up and down completely randomly.

Pair Corralation between Economic Investment and New Zealand

Assuming the 90 days trading horizon Economic Investment is expected to generate 1.85 times less return on investment than New Zealand. But when comparing it to its historical volatility, Economic Investment Trust is 9.11 times less risky than New Zealand. It trades about 0.15 of its potential returns per unit of risk. New Zealand Energy is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  139.00  in New Zealand Energy on September 5, 2024 and sell it today you would lose (29.00) from holding New Zealand Energy or give up 20.86% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Economic Investment Trust  vs.  New Zealand Energy

 Performance 
       Timeline  
Economic Investment Trust 

Risk-Adjusted Performance

4 of 100

 
Weak
 
Strong
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in Economic Investment Trust are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Economic Investment is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.
New Zealand Energy 

Risk-Adjusted Performance

7 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in New Zealand Energy are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, New Zealand showed solid returns over the last few months and may actually be approaching a breakup point.

Economic Investment and New Zealand Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Economic Investment and New Zealand

The main advantage of trading using opposite Economic Investment and New Zealand positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Economic Investment position performs unexpectedly, New Zealand 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 New Zealand will offset losses from the drop in New Zealand's long position.
The idea behind Economic Investment Trust and New Zealand Energy 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.
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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.

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