Correlation Between Economic Investment and Uniteds
Can any of the company-specific risk be diversified away by investing in both Economic Investment and Uniteds 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 Uniteds 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 Uniteds Limited, you can compare the effects of market volatilities on Economic Investment and Uniteds 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 Uniteds. Check out your portfolio center. Please also check ongoing floating volatility patterns of Economic Investment and Uniteds.
Diversification Opportunities for Economic Investment and Uniteds
0.69 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Economic and Uniteds is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Economic Investment Trust and Uniteds Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Uniteds Limited 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 Uniteds. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Uniteds Limited has no effect on the direction of Economic Investment i.e., Economic Investment and Uniteds go up and down completely randomly.
Pair Corralation between Economic Investment and Uniteds
Assuming the 90 days trading horizon Economic Investment Trust is expected to generate 1.64 times more return on investment than Uniteds. However, Economic Investment is 1.64 times more volatile than Uniteds Limited. It trades about 0.17 of its potential returns per unit of risk. Uniteds Limited is currently generating about 0.15 per unit of risk. If you would invest 14,083 in Economic Investment Trust on August 28, 2024 and sell it today you would earn a total of 3,367 from holding Economic Investment Trust or generate 23.91% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Economic Investment Trust vs. Uniteds Limited
Performance |
| Timeline |
| Economic Investment Trust |
| Uniteds Limited |
Economic Investment and Uniteds Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Economic Investment and Uniteds
The main advantage of trading using opposite Economic Investment and Uniteds positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Economic Investment position performs unexpectedly, Uniteds 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 Uniteds will offset losses from the drop in Uniteds' long position.| Economic Investment vs. Uniteds Limited | Economic Investment vs. E L Financial Corp | Economic Investment vs. Canadian General Investments | Economic Investment vs. Clairvest Group |
| Uniteds vs. Economic Investment Trust | Uniteds vs. Canadian General Investments | Uniteds vs. E L Financial Corp | Uniteds vs. Clairvest Group |
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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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