Correlation Between Pear Tree and Essex Environmental
Can any of the company-specific risk be diversified away by investing in both Pear Tree and Essex Environmental 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 Pear Tree and Essex Environmental into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Pear Tree Polaris and Essex Environmental Opportunities, you can compare the effects of market volatilities on Pear Tree and Essex Environmental 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 Pear Tree with a short position of Essex Environmental. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pear Tree and Essex Environmental.
Diversification Opportunities for Pear Tree and Essex Environmental
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Pear and Essex is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Pear Tree Polaris and Essex Environmental Opportunit in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Essex Environmental and Pear Tree 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 Pear Tree Polaris are associated (or correlated) with Essex Environmental. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Essex Environmental has no effect on the direction of Pear Tree i.e., Pear Tree and Essex Environmental go up and down completely randomly.
Pair Corralation between Pear Tree and Essex Environmental
Assuming the 90 days horizon Pear Tree Polaris is expected to generate 1.41 times more return on investment than Essex Environmental. However, Pear Tree is 1.41 times more volatile than Essex Environmental Opportunities. It trades about 0.19 of its potential returns per unit of risk. Essex Environmental Opportunities is currently generating about 0.09 per unit of risk. If you would invest 3,589 in Pear Tree Polaris on August 31, 2024 and sell it today you would earn a total of 253.00 from holding Pear Tree Polaris or generate 7.05% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Pear Tree Polaris vs. Essex Environmental Opportunit
Performance |
| Timeline |
| Pear Tree Polaris |
| Essex Environmental |
Pear Tree and Essex Environmental Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Pear Tree and Essex Environmental
The main advantage of trading using opposite Pear Tree and Essex Environmental positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pear Tree position performs unexpectedly, Essex Environmental 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 Essex Environmental will offset losses from the drop in Essex Environmental's long position.| Pear Tree vs. Goehring Rozencwajg Resources | Pear Tree vs. Jennison Natural Resources | Pear Tree vs. Hennessy Bp Energy | Pear Tree vs. Franklin Natural Resources |
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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