Correlation Between MLP Group and Pepco Group
Can any of the company-specific risk be diversified away by investing in both MLP Group and Pepco Group 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 MLP Group and Pepco Group into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between MLP Group SA and Pepco Group BV, you can compare the effects of market volatilities on MLP Group and Pepco Group 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 MLP Group with a short position of Pepco Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of MLP Group and Pepco Group.
Diversification Opportunities for MLP Group and Pepco Group
0.76 | Correlation Coefficient |
Poor diversification
The 3 months correlation between MLP and Pepco is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding MLP Group SA and Pepco Group BV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pepco Group BV and MLP Group 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 MLP Group SA are associated (or correlated) with Pepco Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pepco Group BV has no effect on the direction of MLP Group i.e., MLP Group and Pepco Group go up and down completely randomly.
Pair Corralation between MLP Group and Pepco Group
Assuming the 90 days trading horizon MLP Group SA is expected to generate 0.81 times more return on investment than Pepco Group. However, MLP Group SA is 1.23 times less risky than Pepco Group. It trades about 0.1 of its potential returns per unit of risk. Pepco Group BV is currently generating about -0.14 per unit of risk. If you would invest 7,040 in MLP Group SA on October 23, 2024 and sell it today you would earn a total of 220.00 from holding MLP Group SA or generate 3.12% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
MLP Group SA vs. Pepco Group BV
Performance |
| Timeline |
| MLP Group SA |
| Pepco Group BV |
MLP Group and Pepco Group Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with MLP Group and Pepco Group
The main advantage of trading using opposite MLP Group and Pepco Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MLP Group position performs unexpectedly, Pepco Group 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 Pepco Group will offset losses from the drop in Pepco Group's long position.| MLP Group vs. UniCredit SpA | MLP Group vs. Play2Chill SA | MLP Group vs. Mlk Foods Public | MLP Group vs. Quantum Software SA |
| Pepco Group vs. Echo Investment SA | Pepco Group vs. GreenX Metals | Pepco Group vs. Marie Brizard Wine | Pepco Group vs. Skyline Investment SA |
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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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