Correlation Between Diamond Estates and Emera Pref

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

By analyzing existing cross correlation between Diamond Estates Wines and Emera Pref A, you can compare the effects of market volatilities on Diamond Estates and Emera Pref 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 Diamond Estates with a short position of Emera Pref. Check out your portfolio center. Please also check ongoing floating volatility patterns of Diamond Estates and Emera Pref.

Diversification Opportunities for Diamond Estates and Emera Pref

-0.85

Correlation Coefficient

Diamond Estates  Emera Pref

Pay attention - limited upside

The 3 months correlation between Diamond and Emera is -0.85. Overlapping area represents the amount of risk that can be diversified away by holding Diamond Estates Wines and Emera Pref A in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Emera Pref A and Diamond Estates 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 Diamond Estates Wines are associated (or correlated) with Emera Pref. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Emera Pref A has no effect on the direction of Diamond Estates i.e., Diamond Estates and Emera Pref go up and down completely randomly.

Pair Corralation between Diamond Estates and Emera Pref

Assuming the 90 days horizon Diamond Estates Wines is expected to under-perform the Emera Pref. In addition to that, Diamond Estates is 6.95 times more volatile than Emera Pref A. It trades about -0.13 of its total potential returns per unit of risk. Emera Pref A is currently generating about 0.18 per unit of volatility. If you would invest  1,502  in Emera Pref A on September 28, 2024 and sell it today you would earn a total of  113.00  from holding Emera Pref A or generate 7.52% return on investment over 90 days.

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

Diamond Estates Wines  vs.  Emera Pref A

Diamond Estates Wines

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Diamond Estates Wines has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Emera Pref A

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Emera Pref A are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat abnormal basic indicators, Emera Pref may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Diamond Estates and Emera Pref

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

The idea behind Diamond Estates Wines and Emera Pref A 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.