Correlation Between EROAD and Steamships Trading

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

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

Diversification Opportunities for EROAD and Steamships Trading

-0.22

Correlation Coefficient

EROAD  Steamships Trading

Very good diversification

The 3 months correlation between EROAD and Steamships is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding EROAD and Steamships Trading in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Steamships Trading 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 Steamships Trading. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Steamships Trading has no effect on the direction of EROAD i.e., EROAD and Steamships Trading go up and down completely randomly.

Pair Corralation between EROAD and Steamships Trading

Assuming the 90 days trading horizon EROAD is expected to generate 3.77 times more return on investment than Steamships Trading. However, EROAD is 3.77 times more volatile than Steamships Trading. It trades about 0.02 of its potential returns per unit of risk. Steamships Trading is currently generating about 0.05 per unit of risk. If you would invest  104.00  in EROAD on October 4, 2024 and sell it today you would lose (9.00) from holding EROAD or give up 8.65% of portfolio value over 90 days.

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

EROAD  vs.  Steamships Trading

EROAD

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in EROAD are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable fundamental indicators, EROAD is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Steamships Trading

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Steamships Trading has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Steamships Trading 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 Steamships Trading

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

The idea behind EROAD and Steamships Trading 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..