Correlation Between Equity Development and Ace Hardware
Can any of the company-specific risk be diversified away by investing in both Equity Development and Ace Hardware 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 Equity Development and Ace Hardware into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Equity Development Investment and Ace Hardware Indonesia, you can compare the effects of market volatilities on Equity Development and Ace Hardware 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 Equity Development with a short position of Ace Hardware. Check out your portfolio center. Please also check ongoing floating volatility patterns of Equity Development and Ace Hardware.
Diversification Opportunities for Equity Development and Ace Hardware
0.48 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Equity and Ace is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Equity Development Investment and Ace Hardware Indonesia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ace Hardware Indonesia and Equity Development 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 Equity Development Investment are associated (or correlated) with Ace Hardware. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ace Hardware Indonesia has no effect on the direction of Equity Development i.e., Equity Development and Ace Hardware go up and down completely randomly.
Pair Corralation between Equity Development and Ace Hardware
Assuming the 90 days trading horizon Equity Development Investment is expected to generate 1.53 times more return on investment than Ace Hardware. However, Equity Development is 1.53 times more volatile than Ace Hardware Indonesia. It trades about -0.06 of its potential returns per unit of risk. Ace Hardware Indonesia is currently generating about -0.32 per unit of risk. If you would invest 5,900 in Equity Development Investment on August 30, 2024 and sell it today you would lose (300.00) from holding Equity Development Investment or give up 5.08% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Equity Development Investment vs. Ace Hardware Indonesia
Performance |
| Timeline |
| Equity Development |
| Ace Hardware Indonesia |
Equity Development and Ace Hardware Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Equity Development and Ace Hardware
The main advantage of trading using opposite Equity Development and Ace Hardware positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Equity Development position performs unexpectedly, Ace Hardware 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 Ace Hardware will offset losses from the drop in Ace Hardware's long position.| Equity Development vs. Pacific Strategic Financial | Equity Development vs. Asuransi Harta Aman | Equity Development vs. Buana Finance Tbk | Equity Development vs. Asuransi Bintang Tbk |
| Ace Hardware vs. Pembangunan Jaya Ancol | Ace Hardware vs. Panorama Sentrawisata Tbk | Ace Hardware vs. Millennium Pharmacon International | Ace Hardware vs. Tempo Inti Media |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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