Correlation Between Computershare and Encounter Resources

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

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

Diversification Opportunities for Computershare and Encounter Resources

-0.56

Correlation Coefficient

Computershare  Encounter Resources

Excellent diversification

The 3 months correlation between Computershare and Encounter is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding Computershare and Encounter Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Encounter Resources and Computershare 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 Computershare are associated (or correlated) with Encounter Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Encounter Resources has no effect on the direction of Computershare i.e., Computershare and Encounter Resources go up and down completely randomly.

Pair Corralation between Computershare and Encounter Resources

Assuming the 90 days trading horizon Computershare is expected to generate 0.34 times more return on investment than Encounter Resources. However, Computershare is 2.98 times less risky than Encounter Resources. It trades about 0.29 of its potential returns per unit of risk. Encounter Resources is currently generating about -0.04 per unit of risk. If you would invest  2,623  in Computershare on October 25, 2024 and sell it today you would earn a total of  820.00  from holding Computershare or generate 31.26% return on investment over 90 days.

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

Computershare  vs.  Encounter Resources

Computershare

Risk-Adjusted Performance

23 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Computershare are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Computershare unveiled solid returns over the last few months and may actually be approaching a breakup point.

Encounter Resources

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Encounter Resources has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Computershare and Encounter Resources

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

The idea behind Computershare and Encounter Resources 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.