Correlation Between Environmental and Boom Logistics

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

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

Diversification Opportunities for Environmental and Boom Logistics

0.37

Correlation Coefficient

Environmental  Boom Logistics

Weak diversification

The 3 months correlation between Environmental and Boom is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding The Environmental Group and Boom Logistics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Boom Logistics and Environmental 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 The Environmental Group are associated (or correlated) with Boom Logistics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Boom Logistics has no effect on the direction of Environmental i.e., Environmental and Boom Logistics go up and down completely randomly.

Pair Corralation between Environmental and Boom Logistics

Assuming the 90 days trading horizon The Environmental Group is expected to under-perform the Boom Logistics. In addition to that, Environmental is 2.35 times more volatile than Boom Logistics. It trades about -0.05 of its total potential returns per unit of risk. Boom Logistics is currently generating about 0.0 per unit of volatility. If you would invest  140.00  in Boom Logistics on September 25, 2024 and sell it today you would lose (1.00) from holding Boom Logistics or give up 0.71% of portfolio value over 90 days.

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

The Environmental Group  vs.  Boom Logistics

The Environmental

Risk-Adjusted Performance

0 of 100

Very Weak

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

Boom Logistics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Boom Logistics has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable essential indicators, Boom Logistics is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Environmental and Boom Logistics

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

The idea behind The Environmental Group and Boom Logistics 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.