Correlation Between Economic Investment and E Split

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

Diversification Opportunities for Economic Investment and E Split

0.31

Correlation Coefficient

Economic Investment  E Split

Weak diversification

The 3 months correlation between Economic and ENS-PA is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Economic Investment Trust and E Split Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on E Split Corp 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 E Split. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of E Split Corp has no effect on the direction of Economic Investment i.e., Economic Investment and E Split go up and down completely randomly.

Pair Corralation between Economic Investment and E Split

Assuming the 90 days trading horizon Economic Investment Trust is expected to generate 1.81 times more return on investment than E Split. However, Economic Investment is 1.81 times more volatile than E Split Corp. It trades about 0.09 of its potential returns per unit of risk. E Split Corp is currently generating about 0.1 per unit of risk. If you would invest  11,522  in Economic Investment Trust on October 9, 2024 and sell it today you would earn a total of  5,197  from holding Economic Investment Trust or generate 45.11% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.8%
Values	Daily Returns

Economic Investment Trust  vs.  E Split Corp

Economic Investment Trust

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Economic Investment Trust are ranked lower than 6 (%) 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 current stock price disarray, may contribute to short-term losses for the investors.

E Split Corp

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in E Split Corp are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, E Split is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Economic Investment and E Split

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

The idea behind Economic Investment Trust and E Split Corp 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.