Correlation Between Evil Empire and Winnebago Industries

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

By analyzing existing cross correlation between Evil Empire Designs and Winnebago Industries, you can compare the effects of market volatilities on Evil Empire and Winnebago Industries 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 Evil Empire with a short position of Winnebago Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of Evil Empire and Winnebago Industries.

Diversification Opportunities for Evil Empire and Winnebago Industries

0.0

Correlation Coefficient

Evil Empire  Winnebago Industries

Pay attention - limited upside

The 3 months correlation between Evil and Winnebago is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Evil Empire Designs and Winnebago Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Winnebago Industries and Evil Empire 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 Evil Empire Designs are associated (or correlated) with Winnebago Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Winnebago Industries has no effect on the direction of Evil Empire i.e., Evil Empire and Winnebago Industries go up and down completely randomly.

Pair Corralation between Evil Empire and Winnebago Industries

Given the investment horizon of 90 days Evil Empire Designs is expected to generate 31.49 times more return on investment than Winnebago Industries. However, Evil Empire is 31.49 times more volatile than Winnebago Industries. It trades about 0.06 of its potential returns per unit of risk. Winnebago Industries is currently generating about -0.03 per unit of risk. If you would invest  16.00  in Evil Empire Designs on September 17, 2024 and sell it today you would lose (15.95) from holding Evil Empire Designs or give up 99.69% of portfolio value over 90 days.

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

Evil Empire Designs  vs.  Winnebago Industries

Evil Empire Designs

Risk-Adjusted Performance

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Very Weak

Over the last 90 days Evil Empire Designs has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Evil Empire is not utilizing all of its potentials. The newest stock price mess, may contribute to short-term losses for the institutional investors.

Winnebago Industries

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Winnebago Industries has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy technical and fundamental indicators, Winnebago Industries is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Evil Empire and Winnebago Industries

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

The idea behind Evil Empire Designs and Winnebago Industries 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.