Correlation Between Edom Technology and Test Research

Can any of the company-specific risk be diversified away by investing in both Edom Technology and Test Research 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 Edom Technology and Test Research into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Edom Technology Co and Test Research, you can compare the effects of market volatilities on Edom Technology and Test Research 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 Edom Technology with a short position of Test Research. Check out your portfolio center. Please also check ongoing floating volatility patterns of Edom Technology and Test Research.

Diversification Opportunities for Edom Technology and Test Research

0.23

Correlation Coefficient

Edom Technology  Test Research

Modest diversification

The 3 months correlation between Edom and Test is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Edom Technology Co and Test Research in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Test Research and Edom Technology 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 Edom Technology Co are associated (or correlated) with Test Research. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Test Research has no effect on the direction of Edom Technology i.e., Edom Technology and Test Research go up and down completely randomly.

Pair Corralation between Edom Technology and Test Research

Assuming the 90 days trading horizon Edom Technology Co is expected to under-perform the Test Research. But the stock apears to be less risky and, when comparing its historical volatility, Edom Technology Co is 1.28 times less risky than Test Research. The stock trades about -0.03 of its potential returns per unit of risk. The Test Research is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  12,100  in Test Research on December 20, 2024 and sell it today you would lose (50.00) from holding Test Research or give up 0.41% of portfolio value over 90 days.

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

Edom Technology Co  vs.  Test Research

Edom Technology

Risk-Adjusted Performance

Very Weak

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

Test Research

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Edom Technology and Test Research

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

The idea behind Edom Technology Co and Test Research 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.