Correlation Between Ecofibre and VanEck FTSE

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

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

Diversification Opportunities for Ecofibre and VanEck FTSE

-0.03

Correlation Coefficient

Ecofibre  VanEck FTSE

Good diversification

The 3 months correlation between Ecofibre and VanEck is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Ecofibre and VanEck FTSE Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VanEck FTSE Global and Ecofibre 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 Ecofibre are associated (or correlated) with VanEck FTSE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VanEck FTSE Global has no effect on the direction of Ecofibre i.e., Ecofibre and VanEck FTSE go up and down completely randomly.

Pair Corralation between Ecofibre and VanEck FTSE

Assuming the 90 days trading horizon Ecofibre is expected to generate 10.31 times more return on investment than VanEck FTSE. However, Ecofibre is 10.31 times more volatile than VanEck FTSE Global. It trades about 0.04 of its potential returns per unit of risk. VanEck FTSE Global is currently generating about 0.02 per unit of risk. If you would invest  2.90  in Ecofibre on September 12, 2024 and sell it today you would earn a total of  0.10  from holding Ecofibre or generate 3.45% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.46%
Values	Daily Returns

Ecofibre  vs.  VanEck FTSE Global

Ecofibre

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Ecofibre are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak technical and fundamental indicators, Ecofibre unveiled solid returns over the last few months and may actually be approaching a breakup point.

VanEck FTSE Global

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in VanEck FTSE Global are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, VanEck FTSE 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 Ecofibre and VanEck FTSE

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

The idea behind Ecofibre and VanEck FTSE Global 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.