Correlation Between Materials Analysis and Holiday Entertainment

Can any of the company-specific risk be diversified away by investing in both Materials Analysis and Holiday Entertainment 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 Materials Analysis and Holiday Entertainment into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for Materials Analysis and Holiday Entertainment

0.8

Correlation Coefficient

Materials Analysis  Holiday Entertainment

Very poor diversification

The 3 months correlation between Materials and Holiday is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Materials Analysis Technology and Holiday Entertainment Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Holiday Entertainment and Materials Analysis 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 Materials Analysis Technology are associated (or correlated) with Holiday Entertainment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Holiday Entertainment has no effect on the direction of Materials Analysis i.e., Materials Analysis and Holiday Entertainment go up and down completely randomly.

Pair Corralation between Materials Analysis and Holiday Entertainment

Assuming the 90 days trading horizon Materials Analysis Technology is expected to generate 3.58 times more return on investment than Holiday Entertainment. However, Materials Analysis is 3.58 times more volatile than Holiday Entertainment Co. It trades about 0.0 of its potential returns per unit of risk. Holiday Entertainment Co is currently generating about -0.06 per unit of risk. If you would invest  26,550  in Materials Analysis Technology on September 5, 2024 and sell it today you would lose (350.00) from holding Materials Analysis Technology or give up 1.32% of portfolio value over 90 days.

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

Materials Analysis Technology  vs.  Holiday Entertainment Co

Materials Analysis

Risk-Adjusted Performance

0 of 100

Very Weak

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

Holiday Entertainment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Holiday Entertainment Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Holiday Entertainment 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 Materials Analysis and Holiday Entertainment

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

The idea behind Materials Analysis Technology and Holiday Entertainment 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.