Correlation Between Economic Investment and Emera Pref

Can any of the company-specific risk be diversified away by investing in both Economic Investment and Emera Pref 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 Emera Pref 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 Emera Pref F, you can compare the effects of market volatilities on Economic Investment and Emera Pref 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 Emera Pref. Check out your portfolio center. Please also check ongoing floating volatility patterns of Economic Investment and Emera Pref.

Diversification Opportunities for Economic Investment and Emera Pref

-0.07

Correlation Coefficient

Economic Investment  Emera Pref

Good diversification

The 3 months correlation between Economic and Emera is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding Economic Investment Trust and Emera Pref F in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Emera Pref F 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 Emera Pref. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Emera Pref F has no effect on the direction of Economic Investment i.e., Economic Investment and Emera Pref go up and down completely randomly.

Pair Corralation between Economic Investment and Emera Pref

Assuming the 90 days trading horizon Economic Investment is expected to generate 1.45 times less return on investment than Emera Pref. But when comparing it to its historical volatility, Economic Investment Trust is 1.07 times less risky than Emera Pref. It trades about 0.16 of its potential returns per unit of risk. Emera Pref F is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  1,939  in Emera Pref F on October 22, 2024 and sell it today you would earn a total of  292.00  from holding Emera Pref F or generate 15.06% return on investment over 90 days.

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

Economic Investment Trust  vs.  Emera Pref F

Economic Investment Trust

Risk-Adjusted Performance

12 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Economic Investment Trust are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Economic Investment may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Emera Pref F

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Emera Pref F are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Emera Pref sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Economic Investment and Emera Pref

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

The idea behind Economic Investment Trust and Emera Pref F 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.