Correlation Between Emera and Caldwell Partners

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

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

Diversification Opportunities for Emera and Caldwell Partners

-0.91

Correlation Coefficient

Emera  Caldwell Partners

Pay attention - limited upside

The 3 months correlation between Emera and Caldwell is -0.91. Overlapping area represents the amount of risk that can be diversified away by holding Emera Inc and Caldwell Partners Internationa in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Caldwell Partners and Emera 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 Emera Inc are associated (or correlated) with Caldwell Partners. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Caldwell Partners has no effect on the direction of Emera i.e., Emera and Caldwell Partners go up and down completely randomly.

Pair Corralation between Emera and Caldwell Partners

Assuming the 90 days trading horizon Emera Inc is expected to generate 0.22 times more return on investment than Caldwell Partners. However, Emera Inc is 4.62 times less risky than Caldwell Partners. It trades about 0.2 of its potential returns per unit of risk. Caldwell Partners International is currently generating about -0.09 per unit of risk. If you would invest  5,336  in Emera Inc on December 30, 2024 and sell it today you would earn a total of  696.00  from holding Emera Inc or generate 13.04% return on investment over 90 days.

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

Emera Inc  vs.  Caldwell Partners Internationa

Emera Inc

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Emera Inc are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Emera may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Caldwell Partners

Risk-Adjusted Performance

Very Weak

Over the last 90 days Caldwell Partners International 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 essential indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Emera and Caldwell Partners

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

The idea behind Emera Inc and Caldwell Partners International 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.