Correlation Between EROAD and Advanced Braking

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

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

Diversification Opportunities for EROAD and Advanced Braking

-0.55

Correlation Coefficient

EROAD  Advanced Braking

Excellent diversification

The 3 months correlation between EROAD and Advanced is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding EROAD and Advanced Braking Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Advanced Braking Tec and EROAD 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 EROAD are associated (or correlated) with Advanced Braking. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Advanced Braking Tec has no effect on the direction of EROAD i.e., EROAD and Advanced Braking go up and down completely randomly.

Pair Corralation between EROAD and Advanced Braking

Assuming the 90 days trading horizon EROAD is expected to generate 0.67 times more return on investment than Advanced Braking. However, EROAD is 1.48 times less risky than Advanced Braking. It trades about 0.23 of its potential returns per unit of risk. Advanced Braking Technology is currently generating about -0.03 per unit of risk. If you would invest  79.00  in EROAD on September 20, 2024 and sell it today you would earn a total of  9.00  from holding EROAD or generate 11.39% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	95.65%
Values	Daily Returns

EROAD  vs.  Advanced Braking Technology

EROAD

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days EROAD has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's fundamental indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Advanced Braking Tec

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Advanced Braking Technology are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Advanced Braking unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with EROAD and Advanced Braking

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

The idea behind EROAD and Advanced Braking Technology 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 Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .