Correlation Between Road Environment and Emdoor Information

Can any of the company-specific risk be diversified away by investing in both Road Environment and Emdoor Information 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 Road Environment and Emdoor Information into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for Road Environment and Emdoor Information

0.41

Correlation Coefficient

Road Environment  Emdoor Information

Very weak diversification

The 3 months correlation between Road and Emdoor is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Road Environment Technology and Emdoor Information Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Emdoor Information and Road Environment 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 Road Environment Technology are associated (or correlated) with Emdoor Information. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Emdoor Information has no effect on the direction of Road Environment i.e., Road Environment and Emdoor Information go up and down completely randomly.

Pair Corralation between Road Environment and Emdoor Information

Assuming the 90 days trading horizon Road Environment Technology is expected to under-perform the Emdoor Information. But the stock apears to be less risky and, when comparing its historical volatility, Road Environment Technology is 1.41 times less risky than Emdoor Information. The stock trades about -0.06 of its potential returns per unit of risk. The Emdoor Information Co is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  4,939  in Emdoor Information Co on October 13, 2024 and sell it today you would lose (474.00) from holding Emdoor Information Co or give up 9.6% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	97.7%
Values	Daily Returns

Road Environment Technology  vs.  Emdoor Information Co

Road Environment Tec

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Road Environment Technology has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Road Environment is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Emdoor Information

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Emdoor Information Co are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Emdoor Information sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Road Environment and Emdoor Information

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

The idea behind Road Environment Technology and Emdoor Information 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.