Correlation Between Steamships Trading and G8 Education
Can any of the company-specific risk be diversified away by investing in both Steamships Trading and G8 Education 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 Steamships Trading and G8 Education into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Steamships Trading and G8 Education, you can compare the effects of market volatilities on Steamships Trading and G8 Education 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 Steamships Trading with a short position of G8 Education. Check out your portfolio center. Please also check ongoing floating volatility patterns of Steamships Trading and G8 Education.
Diversification Opportunities for Steamships Trading and G8 Education
0.2 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Steamships and GEM is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Steamships Trading and G8 Education in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on G8 Education and Steamships Trading 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 Steamships Trading are associated (or correlated) with G8 Education. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of G8 Education has no effect on the direction of Steamships Trading i.e., Steamships Trading and G8 Education go up and down completely randomly.
Pair Corralation between Steamships Trading and G8 Education
Assuming the 90 days trading horizon Steamships Trading is expected to generate 1.26 times less return on investment than G8 Education. But when comparing it to its historical volatility, Steamships Trading is 1.3 times less risky than G8 Education. It trades about 0.05 of its potential returns per unit of risk. G8 Education is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 90.00 in G8 Education on August 29, 2024 and sell it today you would earn a total of 44.00 from holding G8 Education or generate 48.89% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Steamships Trading vs. G8 Education
Performance |
| Timeline |
| Steamships Trading |
| G8 Education |
Steamships Trading and G8 Education Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Steamships Trading and G8 Education
The main advantage of trading using opposite Steamships Trading and G8 Education positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Steamships Trading position performs unexpectedly, G8 Education 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 G8 Education will offset losses from the drop in G8 Education's long position.| Steamships Trading vs. Aneka Tambang Tbk | Steamships Trading vs. ANZ Group Holdings | Steamships Trading vs. Australia and New | Steamships Trading vs. Commonwealth Bank |
| G8 Education vs. Summit Resources Limited | G8 Education vs. Champion Iron | G8 Education vs. Ridley | G8 Education vs. Peel Mining |
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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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