Correlation Between Commercial Credit and E M

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

By analyzing existing cross correlation between Commercial Credit and and E M L, you can compare the effects of market volatilities on Commercial Credit and E M 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 Commercial Credit with a short position of E M. Check out your portfolio center. Please also check ongoing floating volatility patterns of Commercial Credit and E M.

Diversification Opportunities for Commercial Credit and E M

0.69

Correlation Coefficient

Commercial Credit  E M

Poor diversification

The 3 months correlation between Commercial and EMLN0000 is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Commercial Credit and and E M L in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on E M L and Commercial Credit 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 Commercial Credit and are associated (or correlated) with E M. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of E M L has no effect on the direction of Commercial Credit i.e., Commercial Credit and E M go up and down completely randomly.

Pair Corralation between Commercial Credit and E M

Assuming the 90 days trading horizon Commercial Credit and is expected to generate 0.81 times more return on investment than E M. However, Commercial Credit and is 1.23 times less risky than E M. It trades about 0.08 of its potential returns per unit of risk. E M L is currently generating about 0.02 per unit of risk. If you would invest  2,300  in Commercial Credit and on October 9, 2024 and sell it today you would earn a total of  3,330  from holding Commercial Credit and or generate 144.78% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.37%
Values	Daily Returns

Commercial Credit and  vs.  E M L

Commercial Credit

Risk-Adjusted Performance

27 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Commercial Credit and are ranked lower than 27 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Commercial Credit sustained solid returns over the last few months and may actually be approaching a breakup point.

E M L

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in E M L are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, E M sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Commercial Credit and E M

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

The idea behind Commercial Credit and and E M L 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.