Correlation Between Industrials Portfolio and Emerald Growth
Can any of the company-specific risk be diversified away by investing in both Industrials Portfolio and Emerald Growth 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 Industrials Portfolio and Emerald Growth into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Industrials Portfolio Industrials and Emerald Growth Fund, you can compare the effects of market volatilities on Industrials Portfolio and Emerald Growth 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 Industrials Portfolio with a short position of Emerald Growth. Check out your portfolio center. Please also check ongoing floating volatility patterns of Industrials Portfolio and Emerald Growth.
Diversification Opportunities for Industrials Portfolio and Emerald Growth
0.97 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Industrials and Emerald is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Industrials Portfolio Industri and Emerald Growth Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Emerald Growth and Industrials Portfolio 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 Industrials Portfolio Industrials are associated (or correlated) with Emerald Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Emerald Growth has no effect on the direction of Industrials Portfolio i.e., Industrials Portfolio and Emerald Growth go up and down completely randomly.
Pair Corralation between Industrials Portfolio and Emerald Growth
Assuming the 90 days horizon Industrials Portfolio is expected to generate 1.3 times less return on investment than Emerald Growth. But when comparing it to its historical volatility, Industrials Portfolio Industrials is 1.19 times less risky than Emerald Growth. It trades about 0.3 of its potential returns per unit of risk. Emerald Growth Fund is currently generating about 0.32 of returns per unit of risk over similar time horizon. If you would invest 2,654 in Emerald Growth Fund on September 1, 2024 and sell it today you would earn a total of 315.00 from holding Emerald Growth Fund or generate 11.87% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Industrials Portfolio Industri vs. Emerald Growth Fund
Performance |
| Timeline |
| Industrials Portfolio |
| Emerald Growth |
Industrials Portfolio and Emerald Growth Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Industrials Portfolio and Emerald Growth
The main advantage of trading using opposite Industrials Portfolio and Emerald Growth positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Industrials Portfolio position performs unexpectedly, Emerald Growth 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 Emerald Growth will offset losses from the drop in Emerald Growth's long position.The idea behind Industrials Portfolio Industrials and Emerald Growth Fund 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.
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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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.
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