Correlation Between Packages and Loads
Can any of the company-specific risk be diversified away by investing in both Packages and Loads 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 Packages and Loads into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Packages and Loads, you can compare the effects of market volatilities on Packages and Loads 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 Packages with a short position of Loads. Check out your portfolio center. Please also check ongoing floating volatility patterns of Packages and Loads.
Diversification Opportunities for Packages and Loads
Very poor diversification
The 3 months correlation between Packages and Loads is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Packages and Loads in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Loads and Packages 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 Packages are associated (or correlated) with Loads. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Loads has no effect on the direction of Packages i.e., Packages and Loads go up and down completely randomly.
Pair Corralation between Packages and Loads
Assuming the 90 days trading horizon Packages is expected to generate 1.13 times less return on investment than Loads. But when comparing it to its historical volatility, Packages is 1.18 times less risky than Loads. It trades about 0.17 of its potential returns per unit of risk. Loads is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest 1,036 in Loads on September 4, 2024 and sell it today you would earn a total of 370.00 from holding Loads or generate 35.71% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Packages vs. Loads
Performance |
| Timeline |
| Packages |
| Loads |
Packages and Loads Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Packages and Loads
The main advantage of trading using opposite Packages and Loads positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Packages position performs unexpectedly, Loads 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 Loads will offset losses from the drop in Loads' long position.| Packages vs. Sitara Chemical Industries | Packages vs. National Foods | Packages vs. Pakistan Aluminium Beverage | Packages vs. Air Link Communication |
| Loads vs. Packages | Loads vs. Matco Foods | Loads vs. National Foods | Loads vs. Pakistan Aluminium Beverage |
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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.
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