Correlation Between EROAD and Home Consortium

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

By analyzing existing cross correlation between EROAD and Home Consortium, you can compare the effects of market volatilities on EROAD and Home Consortium 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 Home Consortium. Check out your portfolio center. Please also check ongoing floating volatility patterns of EROAD and Home Consortium.

Diversification Opportunities for EROAD and Home Consortium

-0.77

Correlation Coefficient

EROAD  Home Consortium

Pay attention - limited upside

The 3 months correlation between EROAD and Home is -0.77. Overlapping area represents the amount of risk that can be diversified away by holding EROAD and Home Consortium in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Home Consortium 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 Home Consortium. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Home Consortium has no effect on the direction of EROAD i.e., EROAD and Home Consortium go up and down completely randomly.

Pair Corralation between EROAD and Home Consortium

Assuming the 90 days trading horizon EROAD is expected to generate 3.68 times less return on investment than Home Consortium. But when comparing it to its historical volatility, EROAD is 1.41 times less risky than Home Consortium. It trades about 0.01 of its potential returns per unit of risk. Home Consortium is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  919.00  in Home Consortium on December 4, 2024 and sell it today you would earn a total of  7.00  from holding Home Consortium or generate 0.76% return on investment over 90 days.

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

EROAD  vs.  Home Consortium

EROAD

Risk-Adjusted Performance

Modest

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

Home Consortium

Risk-Adjusted Performance

Very Weak

Over the last 90 days Home Consortium 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 April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with EROAD and Home Consortium

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

The idea behind EROAD and Home Consortium 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.

Check out your portfolio center.

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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.