Correlation Between Economic Investment and Dividend

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

By analyzing existing cross correlation between Economic Investment Trust and Dividend 15 Split, you can compare the effects of market volatilities on Economic Investment and Dividend 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 Economic Investment with a short position of Dividend. Check out your portfolio center. Please also check ongoing floating volatility patterns of Economic Investment and Dividend.

Diversification Opportunities for Economic Investment and Dividend

0.63

Correlation Coefficient

Economic Investment  Dividend

Poor diversification

The 3 months correlation between Economic and Dividend is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Economic Investment Trust and Dividend 15 Split in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dividend 15 Split and Economic Investment 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 Economic Investment Trust are associated (or correlated) with Dividend. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dividend 15 Split has no effect on the direction of Economic Investment i.e., Economic Investment and Dividend go up and down completely randomly.

Pair Corralation between Economic Investment and Dividend

Assuming the 90 days trading horizon Economic Investment Trust is expected to under-perform the Dividend. But the stock apears to be less risky and, when comparing its historical volatility, Economic Investment Trust is 1.54 times less risky than Dividend. The stock trades about -0.28 of its potential returns per unit of risk. The Dividend 15 Split is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  636.00  in Dividend 15 Split on October 6, 2024 and sell it today you would lose (6.00) from holding Dividend 15 Split or give up 0.94% of portfolio value over 90 days.

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

Economic Investment Trust  vs.  Dividend 15 Split

Economic Investment Trust

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Economic Investment Trust are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Economic Investment is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Dividend 15 Split

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Dividend 15 Split are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Dividend may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Economic Investment and Dividend

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

The idea behind Economic Investment Trust and Dividend 15 Split 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.