Correlation Between EP Financial and Pioneer Credit

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

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

Diversification Opportunities for EP Financial and Pioneer Credit

0.54

Correlation Coefficient

EP Financial  Pioneer Credit

Very weak diversification

The 3 months correlation between EP1 and Pioneer is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding EP Financial Group and Pioneer Credit in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pioneer Credit and EP Financial 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 EP Financial Group are associated (or correlated) with Pioneer Credit. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pioneer Credit has no effect on the direction of EP Financial i.e., EP Financial and Pioneer Credit go up and down completely randomly.

Pair Corralation between EP Financial and Pioneer Credit

Assuming the 90 days trading horizon EP Financial is expected to generate 3.87 times less return on investment than Pioneer Credit. But when comparing it to its historical volatility, EP Financial Group is 1.16 times less risky than Pioneer Credit. It trades about 0.02 of its potential returns per unit of risk. Pioneer Credit is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  30.00  in Pioneer Credit on September 1, 2024 and sell it today you would earn a total of  36.00  from holding Pioneer Credit or generate 120.0% return on investment over 90 days.

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

EP Financial Group  vs.  Pioneer Credit

EP Financial Group

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in EP Financial Group are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, EP Financial unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pioneer Credit

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Pioneer Credit are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak fundamental indicators, Pioneer Credit unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with EP Financial and Pioneer Credit

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

The idea behind EP Financial Group and Pioneer Credit 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.