Correlation Between ECD Automotive and Strattec Security

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

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

Diversification Opportunities for ECD Automotive and Strattec Security

-0.65

Correlation Coefficient

ECD Automotive  Strattec Security

Excellent diversification

The 3 months correlation between ECD and Strattec is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding ECD Automotive Design and Strattec Security in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Strattec Security and ECD Automotive 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 ECD Automotive Design are associated (or correlated) with Strattec Security. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Strattec Security has no effect on the direction of ECD Automotive i.e., ECD Automotive and Strattec Security go up and down completely randomly.

Pair Corralation between ECD Automotive and Strattec Security

Given the investment horizon of 90 days ECD Automotive Design is expected to under-perform the Strattec Security. In addition to that, ECD Automotive is 1.28 times more volatile than Strattec Security. It trades about -0.03 of its total potential returns per unit of risk. Strattec Security is currently generating about 0.05 per unit of volatility. If you would invest  3,845  in Strattec Security on October 8, 2024 and sell it today you would earn a total of  242.00  from holding Strattec Security or generate 6.29% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.41%
Values	Daily Returns

ECD Automotive Design  vs.  Strattec Security

ECD Automotive Design

Risk-Adjusted Performance

0 of 100

Very Weak

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

Strattec Security

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Strattec Security are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, Strattec Security may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with ECD Automotive and Strattec Security

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

The idea behind ECD Automotive Design and Strattec Security 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.