Correlation Between Test Research and Edom Technology
Can any of the company-specific risk be diversified away by investing in both Test Research and Edom Technology 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 Test Research and Edom Technology into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Test Research and Edom Technology Co, you can compare the effects of market volatilities on Test Research and Edom Technology 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 Test Research with a short position of Edom Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Test Research and Edom Technology.
Diversification Opportunities for Test Research and Edom Technology
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Test and Edom is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Test Research and Edom Technology Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Edom Technology and Test Research 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 Test Research are associated (or correlated) with Edom Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Edom Technology has no effect on the direction of Test Research i.e., Test Research and Edom Technology go up and down completely randomly.
Pair Corralation between Test Research and Edom Technology
Assuming the 90 days trading horizon Test Research is expected to generate 1.21 times more return on investment than Edom Technology. However, Test Research is 1.21 times more volatile than Edom Technology Co. It trades about -0.07 of its potential returns per unit of risk. Edom Technology Co is currently generating about -0.18 per unit of risk. If you would invest 13,700 in Test Research on October 10, 2024 and sell it today you would lose (1,800) from holding Test Research or give up 13.14% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Strong |
Accuracy | 100.0% |
Values | Daily Returns |
Test Research vs. Edom Technology Co
Performance |
Timeline |
Test Research |
Edom Technology |
Test Research and Edom Technology Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Test Research and Edom Technology
The main advantage of trading using opposite Test Research and Edom Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Test Research position performs unexpectedly, Edom Technology 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 Edom Technology will offset losses from the drop in Edom Technology's long position.Test Research vs. Wah Lee Industrial | Test Research vs. Huaku Development Co | Test Research vs. Topco Scientific Co | Test Research vs. Standard Foods Corp |
Edom Technology vs. Altek Corp | Edom Technology vs. ALi Corp | Edom Technology vs. Leader Electronics | Edom Technology vs. Spirox Corp |
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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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