Correlation Between Uniteds and Economic Investment
Can any of the company-specific risk be diversified away by investing in both Uniteds and Economic 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 Uniteds and Economic Investment into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Uniteds Limited and Economic Investment Trust, you can compare the effects of market volatilities on Uniteds and Economic 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 Uniteds with a short position of Economic Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Uniteds and Economic Investment.
Diversification Opportunities for Uniteds and Economic Investment
0.61 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Uniteds and Economic is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Uniteds Limited and Economic Investment Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Economic Investment Trust and Uniteds 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 Uniteds Limited are associated (or correlated) with Economic Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Economic Investment Trust has no effect on the direction of Uniteds i.e., Uniteds and Economic Investment go up and down completely randomly.
Pair Corralation between Uniteds and Economic Investment
Assuming the 90 days trading horizon Uniteds is expected to generate 1.89 times less return on investment than Economic Investment. In addition to that, Uniteds is 1.27 times more volatile than Economic Investment Trust. It trades about 0.17 of its total potential returns per unit of risk. Economic Investment Trust is currently generating about 0.42 per unit of volatility. If you would invest 16,384 in Economic Investment Trust on November 3, 2024 and sell it today you would earn a total of 1,976 from holding Economic Investment Trust or generate 12.06% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Uniteds Limited vs. Economic Investment Trust
Performance |
| Timeline |
| Uniteds Limited |
| Economic Investment Trust |
Uniteds and Economic Investment Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Uniteds and Economic Investment
The main advantage of trading using opposite Uniteds and Economic Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Uniteds position performs unexpectedly, Economic 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 Economic Investment will offset losses from the drop in Economic Investment's long position.| Uniteds vs. Economic Investment Trust | Uniteds vs. Canadian General Investments | Uniteds vs. E L Financial Corp | Uniteds vs. Clairvest Group |
| Economic Investment vs. Uniteds Limited | Economic Investment vs. E L Financial Corp | Economic Investment vs. Canadian General Investments | Economic Investment vs. Clairvest Group |
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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