Correlation Between Prime Financial and EROAD
Can any of the company-specific risk be diversified away by investing in both Prime Financial and EROAD 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 Prime Financial and EROAD into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Prime Financial Group and EROAD, you can compare the effects of market volatilities on Prime Financial and EROAD 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 Prime Financial with a short position of EROAD. Check out your portfolio center. Please also check ongoing floating volatility patterns of Prime Financial and EROAD.
Diversification Opportunities for Prime Financial and EROAD
-0.61 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Prime and EROAD is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding Prime Financial Group and EROAD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EROAD and Prime Financial 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 Prime Financial Group are associated (or correlated) with EROAD. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EROAD has no effect on the direction of Prime Financial i.e., Prime Financial and EROAD go up and down completely randomly.
Pair Corralation between Prime Financial and EROAD
Assuming the 90 days trading horizon Prime Financial Group is expected to generate 0.94 times more return on investment than EROAD. However, Prime Financial Group is 1.06 times less risky than EROAD. It trades about 0.04 of its potential returns per unit of risk. EROAD is currently generating about 0.0 per unit of risk. If you would invest 20.00 in Prime Financial Group on September 2, 2024 and sell it today you would earn a total of 2.00 from holding Prime Financial Group or generate 10.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Prime Financial Group vs. EROAD
Performance |
| Timeline |
| Prime Financial Group |
| EROAD |
Prime Financial and EROAD Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Prime Financial and EROAD
The main advantage of trading using opposite Prime Financial and EROAD positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Prime Financial position performs unexpectedly, EROAD 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 EROAD will offset losses from the drop in EROAD's long position.| Prime Financial vs. Legacy Iron Ore | Prime Financial vs. Cleanaway Waste Management | Prime Financial vs. Hutchison Telecommunications | Prime Financial vs. Carnegie Clean Energy |
| EROAD vs. Mayfield Childcare | EROAD vs. Ainsworth Game Technology | EROAD vs. Ras Technology Holdings | EROAD vs. Super Retail Group |
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 Valuation module to check real value of public entities based on technical and fundamental data.
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