Correlation Between S-E BANKEN and ECHO INVESTMENT
Can any of the company-specific risk be diversified away by investing in both S-E BANKEN and ECHO INVESTMENT 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 S-E BANKEN and ECHO INVESTMENT into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between S E BANKEN A and ECHO INVESTMENT ZY, you can compare the effects of market volatilities on S-E BANKEN and ECHO INVESTMENT 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 S-E BANKEN with a short position of ECHO INVESTMENT. Check out your portfolio center. Please also check ongoing floating volatility patterns of S-E BANKEN and ECHO INVESTMENT.
Diversification Opportunities for S-E BANKEN and ECHO INVESTMENT
0.07 | Correlation Coefficient |
Significant diversification
The 3 months correlation between S-E and ECHO is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding S E BANKEN A and ECHO INVESTMENT ZY in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ECHO INVESTMENT ZY and S-E BANKEN 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 S E BANKEN A are associated (or correlated) with ECHO INVESTMENT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ECHO INVESTMENT ZY has no effect on the direction of S-E BANKEN i.e., S-E BANKEN and ECHO INVESTMENT go up and down completely randomly.
Pair Corralation between S-E BANKEN and ECHO INVESTMENT
Assuming the 90 days trading horizon S E BANKEN A is expected to generate 0.92 times more return on investment than ECHO INVESTMENT. However, S E BANKEN A is 1.08 times less risky than ECHO INVESTMENT. It trades about 0.07 of its potential returns per unit of risk. ECHO INVESTMENT ZY is currently generating about -0.24 per unit of risk. If you would invest 1,345 in S E BANKEN A on November 7, 2024 and sell it today you would earn a total of 26.00 from holding S E BANKEN A or generate 1.93% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
S E BANKEN A vs. ECHO INVESTMENT ZY
Performance |
| Timeline |
| S E BANKEN |
| ECHO INVESTMENT ZY |
S-E BANKEN and ECHO INVESTMENT Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with S-E BANKEN and ECHO INVESTMENT
The main advantage of trading using opposite S-E BANKEN and ECHO INVESTMENT positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if S-E BANKEN position performs unexpectedly, ECHO INVESTMENT 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 ECHO INVESTMENT will offset losses from the drop in ECHO INVESTMENT's long position.| S-E BANKEN vs. InterContinental Hotels Group | S-E BANKEN vs. Xenia Hotels Resorts | S-E BANKEN vs. NH HOTEL GROUP | S-E BANKEN vs. Endeavour Mining PLC |
| ECHO INVESTMENT vs. Fukuyama Transporting Co | ECHO INVESTMENT vs. ANTA SPORTS PRODUCT | ECHO INVESTMENT vs. EIDESVIK OFFSHORE NK | ECHO INVESTMENT vs. American Homes 4 |
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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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