Correlation Between EROAD and Supply Network

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

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

Diversification Opportunities for EROAD and Supply Network

0.4

Correlation Coefficient

EROAD  Supply Network

Very weak diversification

The 3 months correlation between EROAD and Supply is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding EROAD and Supply Network in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Supply Network 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 Supply Network. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Supply Network has no effect on the direction of EROAD i.e., EROAD and Supply Network go up and down completely randomly.

Pair Corralation between EROAD and Supply Network

Assuming the 90 days trading horizon EROAD is expected to generate 4.09 times more return on investment than Supply Network. However, EROAD is 4.09 times more volatile than Supply Network. It trades about 0.24 of its potential returns per unit of risk. Supply Network is currently generating about 0.09 per unit of risk. If you would invest  86.00  in EROAD on October 7, 2024 and sell it today you would earn a total of  14.00  from holding EROAD or generate 16.28% return on investment over 90 days.

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

EROAD  vs.  Supply Network

EROAD

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in EROAD are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain fundamental indicators, EROAD may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Supply Network

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Supply Network are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable essential indicators, Supply Network 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 EROAD and Supply Network

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

The idea behind EROAD and Supply Network 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.