Correlation Between EcoSynthetix and Kits Eyecare

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

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

Diversification Opportunities for EcoSynthetix and Kits Eyecare

0.52

Correlation Coefficient

EcoSynthetix  Kits Eyecare

Very weak diversification

The 3 months correlation between EcoSynthetix and Kits is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding EcoSynthetix and Kits Eyecare in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kits Eyecare and EcoSynthetix 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 EcoSynthetix are associated (or correlated) with Kits Eyecare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kits Eyecare has no effect on the direction of EcoSynthetix i.e., EcoSynthetix and Kits Eyecare go up and down completely randomly.

Pair Corralation between EcoSynthetix and Kits Eyecare

Assuming the 90 days trading horizon EcoSynthetix is expected to generate 1.07 times more return on investment than Kits Eyecare. However, EcoSynthetix is 1.07 times more volatile than Kits Eyecare. It trades about -0.08 of its potential returns per unit of risk. Kits Eyecare is currently generating about -0.18 per unit of risk. If you would invest  473.00  in EcoSynthetix on October 5, 2024 and sell it today you would lose (52.00) from holding EcoSynthetix or give up 10.99% of portfolio value over 90 days.

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

EcoSynthetix  vs.  Kits Eyecare

EcoSynthetix

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days EcoSynthetix has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Kits Eyecare

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kits Eyecare has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in February 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with EcoSynthetix and Kits Eyecare

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

The idea behind EcoSynthetix and Kits Eyecare 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.