Correlation Between Global Technology and Eaton Vance
Can any of the company-specific risk be diversified away by investing in both Global Technology and Eaton Vance 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 Global Technology and Eaton Vance into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Global Technology Portfolio and Eaton Vance National, you can compare the effects of market volatilities on Global Technology and Eaton Vance 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 Global Technology with a short position of Eaton Vance. Check out your portfolio center. Please also check ongoing floating volatility patterns of Global Technology and Eaton Vance.
Diversification Opportunities for Global Technology and Eaton Vance
-0.14 | Correlation Coefficient |
Good diversification
The 3 months correlation between Global and Eaton is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Global Technology Portfolio and Eaton Vance National in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eaton Vance National and Global Technology 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 Global Technology Portfolio are associated (or correlated) with Eaton Vance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eaton Vance National has no effect on the direction of Global Technology i.e., Global Technology and Eaton Vance go up and down completely randomly.
Pair Corralation between Global Technology and Eaton Vance
Assuming the 90 days horizon Global Technology Portfolio is expected to generate 4.56 times more return on investment than Eaton Vance. However, Global Technology is 4.56 times more volatile than Eaton Vance National. It trades about 0.11 of its potential returns per unit of risk. Eaton Vance National is currently generating about 0.06 per unit of risk. If you would invest 1,113 in Global Technology Portfolio on September 4, 2024 and sell it today you would earn a total of 1,026 from holding Global Technology Portfolio or generate 92.18% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.79% |
| Values | Daily Returns |
Global Technology Portfolio vs. Eaton Vance National
Performance |
| Timeline |
| Global Technology |
| Eaton Vance National |
Global Technology and Eaton Vance Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Global Technology and Eaton Vance
The main advantage of trading using opposite Global Technology and Eaton Vance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Global Technology position performs unexpectedly, Eaton Vance 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 Eaton Vance will offset losses from the drop in Eaton Vance's long position.The idea behind Global Technology Portfolio and Eaton Vance National 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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