Correlation Between Economic Investment and South Pacific
Can any of the company-specific risk be diversified away by investing in both Economic Investment and South Pacific 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 South Pacific 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 South Pacific Metals, you can compare the effects of market volatilities on Economic Investment and South Pacific 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 South Pacific. Check out your portfolio center. Please also check ongoing floating volatility patterns of Economic Investment and South Pacific.
Diversification Opportunities for Economic Investment and South Pacific
0.33 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Economic and South is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Economic Investment Trust and South Pacific Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on South Pacific Metals 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 South Pacific. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of South Pacific Metals has no effect on the direction of Economic Investment i.e., Economic Investment and South Pacific go up and down completely randomly.
Pair Corralation between Economic Investment and South Pacific
Assuming the 90 days trading horizon Economic Investment is expected to generate 1.32 times less return on investment than South Pacific. But when comparing it to its historical volatility, Economic Investment Trust is 2.83 times less risky than South Pacific. It trades about 0.38 of its potential returns per unit of risk. South Pacific Metals is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest 45.00 in South Pacific Metals on October 28, 2024 and sell it today you would earn a total of 6.00 from holding South Pacific Metals or generate 13.33% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Economic Investment Trust vs. South Pacific Metals
Performance |
| Timeline |
| Economic Investment Trust |
| South Pacific Metals |
Economic Investment and South Pacific Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Economic Investment and South Pacific
The main advantage of trading using opposite Economic Investment and South Pacific positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Economic Investment position performs unexpectedly, South Pacific 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 South Pacific will offset losses from the drop in South Pacific's long position.| Economic Investment vs. Enbridge Pref 5 | Economic Investment vs. Enbridge Pref 11 | Economic Investment vs. Enbridge Pref L | Economic Investment vs. E Split Corp |
| South Pacific vs. Precision Drilling | South Pacific vs. Sun Peak Metals | South Pacific vs. Partners Value Investments | South Pacific vs. Magna Mining |
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 Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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