Correlation Between Tower Investments and Pepco Group
Can any of the company-specific risk be diversified away by investing in both Tower Investments and Pepco Group 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 Tower Investments and Pepco Group into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Tower Investments SA and Pepco Group BV, you can compare the effects of market volatilities on Tower Investments and Pepco Group 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 Tower Investments with a short position of Pepco Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tower Investments and Pepco Group.
Diversification Opportunities for Tower Investments and Pepco Group
0.2 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Tower and Pepco is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Tower Investments SA and Pepco Group BV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pepco Group BV and Tower Investments 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 Tower Investments SA are associated (or correlated) with Pepco Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pepco Group BV has no effect on the direction of Tower Investments i.e., Tower Investments and Pepco Group go up and down completely randomly.
Pair Corralation between Tower Investments and Pepco Group
Assuming the 90 days trading horizon Tower Investments SA is expected to generate 2.19 times more return on investment than Pepco Group. However, Tower Investments is 2.19 times more volatile than Pepco Group BV. It trades about -0.02 of its potential returns per unit of risk. Pepco Group BV is currently generating about -0.06 per unit of risk. If you would invest 1,010 in Tower Investments SA on August 30, 2024 and sell it today you would lose (746.00) from holding Tower Investments SA or give up 73.86% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Tower Investments SA vs. Pepco Group BV
Performance |
| Timeline |
| Tower Investments |
| Pepco Group BV |
Tower Investments and Pepco Group Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Tower Investments and Pepco Group
The main advantage of trading using opposite Tower Investments and Pepco Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tower Investments position performs unexpectedly, Pepco Group 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 Pepco Group will offset losses from the drop in Pepco Group's long position.| Tower Investments vs. Dom Development SA | Tower Investments vs. Asseco Business Solutions | Tower Investments vs. Detalion Games SA | Tower Investments vs. CFI Holding SA |
| Pepco Group vs. Carlson Investments SA | Pepco Group vs. Tower Investments SA | Pepco Group vs. Mercator Medical SA | Pepco Group vs. Bank Millennium SA |
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 Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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