Correlation Between Equitable and Exchange Income

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

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

Diversification Opportunities for Equitable and Exchange Income

-0.13

Correlation Coefficient

Equitable  Exchange Income

Good diversification

The 3 months correlation between Equitable and Exchange is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding Equitable Group and Exchange Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Exchange Income and Equitable 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 Equitable Group are associated (or correlated) with Exchange Income. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Exchange Income has no effect on the direction of Equitable i.e., Equitable and Exchange Income go up and down completely randomly.

Pair Corralation between Equitable and Exchange Income

Assuming the 90 days trading horizon Equitable Group is expected to generate 1.34 times more return on investment than Exchange Income. However, Equitable is 1.34 times more volatile than Exchange Income. It trades about -0.08 of its potential returns per unit of risk. Exchange Income is currently generating about -0.13 per unit of risk. If you would invest  11,125  in Equitable Group on December 2, 2024 and sell it today you would lose (1,015) from holding Equitable Group or give up 9.12% of portfolio value over 90 days.

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

Equitable Group  vs.  Exchange Income

Equitable Group

Risk-Adjusted Performance

Very Weak

Over the last 90 days Equitable Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's fundamental drivers remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Exchange Income

Risk-Adjusted Performance

Very Weak

Over the last 90 days Exchange Income has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's technical and fundamental indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Equitable and Exchange Income

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

The idea behind Equitable Group and Exchange Income 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 Transaction History module to view history of all your transactions and understand their impact on performance.