Correlation Between Majic Wheels and EcoPlus
Can any of the company-specific risk be diversified away by investing in both Majic Wheels and EcoPlus 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 Majic Wheels and EcoPlus into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Majic Wheels Corp and EcoPlus, you can compare the effects of market volatilities on Majic Wheels and EcoPlus 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 Majic Wheels with a short position of EcoPlus. Check out your portfolio center. Please also check ongoing floating volatility patterns of Majic Wheels and EcoPlus.
Diversification Opportunities for Majic Wheels and EcoPlus
-0.2 | Correlation Coefficient |
Good diversification
The 3 months correlation between Majic and EcoPlus is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Majic Wheels Corp and EcoPlus in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EcoPlus and Majic Wheels 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 Majic Wheels Corp are associated (or correlated) with EcoPlus. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EcoPlus has no effect on the direction of Majic Wheels i.e., Majic Wheels and EcoPlus go up and down completely randomly.
Pair Corralation between Majic Wheels and EcoPlus
Given the investment horizon of 90 days Majic Wheels is expected to generate 1.36 times less return on investment than EcoPlus. In addition to that, Majic Wheels is 1.08 times more volatile than EcoPlus. It trades about 0.06 of its total potential returns per unit of risk. EcoPlus is currently generating about 0.09 per unit of volatility. If you would invest 2.00 in EcoPlus on September 3, 2024 and sell it today you would lose (0.70) from holding EcoPlus or give up 35.0% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.8% |
| Values | Daily Returns |
Majic Wheels Corp vs. EcoPlus
Performance |
| Timeline |
| Majic Wheels Corp |
| EcoPlus |
Majic Wheels and EcoPlus Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Majic Wheels and EcoPlus
The main advantage of trading using opposite Majic Wheels and EcoPlus positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Majic Wheels position performs unexpectedly, EcoPlus 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 EcoPlus will offset losses from the drop in EcoPlus' long position.| Majic Wheels vs. Houston Natural Resources | Majic Wheels vs. BluMetric Environmental | Majic Wheels vs. Ecoloclean Industrs | Majic Wheels vs. BQE Water |
| EcoPlus vs. Republic Services | EcoPlus vs. Waste Connections | EcoPlus vs. Clean Harbors | EcoPlus vs. Gfl Environmental Holdings |
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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
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