Correlation Between EnTie Commercial and Sports Gear

Can any of the company-specific risk be diversified away by investing in both EnTie Commercial and Sports Gear 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 EnTie Commercial and Sports Gear into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between EnTie Commercial Bank and Sports Gear Co, you can compare the effects of market volatilities on EnTie Commercial and Sports Gear 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 EnTie Commercial with a short position of Sports Gear. Check out your portfolio center. Please also check ongoing floating volatility patterns of EnTie Commercial and Sports Gear.

Diversification Opportunities for EnTie Commercial and Sports Gear

0.48

Correlation Coefficient

EnTie Commercial  Sports Gear

Very weak diversification

The 3 months correlation between EnTie and Sports is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding EnTie Commercial Bank and Sports Gear Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sports Gear and EnTie Commercial 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 EnTie Commercial Bank are associated (or correlated) with Sports Gear. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sports Gear has no effect on the direction of EnTie Commercial i.e., EnTie Commercial and Sports Gear go up and down completely randomly.

Pair Corralation between EnTie Commercial and Sports Gear

Assuming the 90 days trading horizon EnTie Commercial Bank is expected to under-perform the Sports Gear. But the stock apears to be less risky and, when comparing its historical volatility, EnTie Commercial Bank is 3.83 times less risky than Sports Gear. The stock trades about -0.01 of its potential returns per unit of risk. The Sports Gear Co is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  12,600  in Sports Gear Co on December 5, 2024 and sell it today you would earn a total of  2,400  from holding Sports Gear Co or generate 19.05% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

EnTie Commercial Bank  vs.  Sports Gear Co

EnTie Commercial Bank

Risk-Adjusted Performance

Very Weak

Over the last 90 days EnTie Commercial Bank has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, EnTie Commercial is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Sports Gear

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Sports Gear Co are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Sports Gear may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with EnTie Commercial and Sports Gear

The main advantage of trading using opposite EnTie Commercial and Sports Gear positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if EnTie Commercial position performs unexpectedly, Sports Gear 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 Sports Gear will offset losses from the drop in Sports Gear's long position.

The idea behind EnTie Commercial Bank and Sports Gear Co pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.