Correlation Between Independence Realty and ECD Automotive
Can any of the company-specific risk be diversified away by investing in both Independence Realty and ECD Automotive 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 Independence Realty and ECD Automotive into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Independence Realty Trust and ECD Automotive Design, you can compare the effects of market volatilities on Independence Realty and ECD Automotive 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 Independence Realty with a short position of ECD Automotive. Check out your portfolio center. Please also check ongoing floating volatility patterns of Independence Realty and ECD Automotive.
Diversification Opportunities for Independence Realty and ECD Automotive
-0.39 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Independence and ECD is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Independence Realty Trust and ECD Automotive Design in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ECD Automotive Design and Independence Realty 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 Independence Realty Trust are associated (or correlated) with ECD Automotive. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ECD Automotive Design has no effect on the direction of Independence Realty i.e., Independence Realty and ECD Automotive go up and down completely randomly.
Pair Corralation between Independence Realty and ECD Automotive
Considering the 90-day investment horizon Independence Realty is expected to generate 1.2 times less return on investment than ECD Automotive. But when comparing it to its historical volatility, Independence Realty Trust is 4.44 times less risky than ECD Automotive. It trades about 0.12 of its potential returns per unit of risk. ECD Automotive Design is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 98.00 in ECD Automotive Design on September 19, 2024 and sell it today you would earn a total of 4.20 from holding ECD Automotive Design or generate 4.29% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Independence Realty Trust vs. ECD Automotive Design
Performance |
| Timeline |
| Independence Realty Trust |
| ECD Automotive Design |
Independence Realty and ECD Automotive Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Independence Realty and ECD Automotive
The main advantage of trading using opposite Independence Realty and ECD Automotive positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Independence Realty position performs unexpectedly, ECD Automotive 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 ECD Automotive will offset losses from the drop in ECD Automotive's long position.The idea behind Independence Realty Trust and ECD Automotive Design 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.| ECD Automotive vs. Artisan Partners Asset | ECD Automotive vs. MGIC Investment Corp | ECD Automotive vs. Western Asset Investment | ECD Automotive vs. Independence Realty Trust |
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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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