Correlation Between Emerge Commerce and KDA
Can any of the company-specific risk be diversified away by investing in both Emerge Commerce and KDA 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 Emerge Commerce and KDA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Emerge Commerce and KDA Group, you can compare the effects of market volatilities on Emerge Commerce and KDA 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 Emerge Commerce with a short position of KDA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Emerge Commerce and KDA.
Diversification Opportunities for Emerge Commerce and KDA
0.59 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Emerge and KDA is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Emerge Commerce and KDA Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KDA Group and Emerge Commerce 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 Emerge Commerce are associated (or correlated) with KDA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KDA Group has no effect on the direction of Emerge Commerce i.e., Emerge Commerce and KDA go up and down completely randomly.
Pair Corralation between Emerge Commerce and KDA
Assuming the 90 days trading horizon Emerge Commerce is expected to generate 2.45 times more return on investment than KDA. However, Emerge Commerce is 2.45 times more volatile than KDA Group. It trades about 0.17 of its potential returns per unit of risk. KDA Group is currently generating about 0.3 per unit of risk. If you would invest 4.00 in Emerge Commerce on September 17, 2024 and sell it today you would earn a total of 1.00 from holding Emerge Commerce or generate 25.0% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Emerge Commerce vs. KDA Group
Performance |
Timeline |
Emerge Commerce |
KDA Group |
Emerge Commerce and KDA Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Emerge Commerce and KDA
The main advantage of trading using opposite Emerge Commerce and KDA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Emerge Commerce position performs unexpectedly, KDA 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 KDA will offset losses from the drop in KDA's long position.Emerge Commerce vs. KDA Group | Emerge Commerce vs. iShares Canadian HYBrid | Emerge Commerce vs. Altagas Cum Red | Emerge Commerce vs. European Residential Real |
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Check out your portfolio center.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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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