Correlation Between Apiam Animal and EROAD

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

By analyzing existing cross correlation between Apiam Animal Health and EROAD, you can compare the effects of market volatilities on Apiam Animal and EROAD 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 Apiam Animal with a short position of EROAD. Check out your portfolio center. Please also check ongoing floating volatility patterns of Apiam Animal and EROAD.

Diversification Opportunities for Apiam Animal and EROAD

-0.33

Correlation Coefficient

Apiam Animal  EROAD

Very good diversification

The 3 months correlation between Apiam and EROAD is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Apiam Animal Health and EROAD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EROAD and Apiam Animal 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 Apiam Animal Health are associated (or correlated) with EROAD. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EROAD has no effect on the direction of Apiam Animal i.e., Apiam Animal and EROAD go up and down completely randomly.

Pair Corralation between Apiam Animal and EROAD

Assuming the 90 days trading horizon Apiam Animal Health is expected to under-perform the EROAD. But the stock apears to be less risky and, when comparing its historical volatility, Apiam Animal Health is 1.24 times less risky than EROAD. The stock trades about 0.0 of its potential returns per unit of risk. The EROAD is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  75.00  in EROAD on October 9, 2024 and sell it today you would earn a total of  25.00  from holding EROAD or generate 33.33% return on investment over 90 days.

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

Apiam Animal Health  vs.  EROAD

Apiam Animal Health

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Apiam Animal Health has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

EROAD

Risk-Adjusted Performance

4 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in EROAD are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain fundamental indicators, EROAD may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Apiam Animal and EROAD

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

The idea behind Apiam Animal Health and EROAD 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.