Correlation Between Economic Investment and Hampton Financial

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

Diversification Opportunities for Economic Investment and Hampton Financial

0.5

Correlation Coefficient

Economic Investment  Hampton Financial

Very weak diversification

The 3 months correlation between Economic and Hampton is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Economic Investment Trust and Hampton Financial Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hampton Financial 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 Hampton Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hampton Financial Corp has no effect on the direction of Economic Investment i.e., Economic Investment and Hampton Financial go up and down completely randomly.

Pair Corralation between Economic Investment and Hampton Financial

Assuming the 90 days trading horizon Economic Investment Trust is expected to generate 1.85 times more return on investment than Hampton Financial. However, Economic Investment is 1.85 times more volatile than Hampton Financial Corp. It trades about -0.01 of its potential returns per unit of risk. Hampton Financial Corp is currently generating about -0.14 per unit of risk. If you would invest  16,484  in Economic Investment Trust on December 22, 2024 and sell it today you would lose (482.00) from holding Economic Investment Trust or give up 2.92% of portfolio value over 90 days.

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

Economic Investment Trust  vs.  Hampton Financial Corp

Economic Investment Trust

Risk-Adjusted Performance

Very Weak

Over the last 90 days Economic Investment Trust has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

Hampton Financial Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Hampton Financial Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Pair Trading with Economic Investment and Hampton Financial

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

The idea behind Economic Investment Trust and Hampton Financial 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.