Correlation Between First and Eco Animal

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

By analyzing existing cross correlation between First Class Metals and Eco Animal Health, you can compare the effects of market volatilities on First and Eco Animal 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 First with a short position of Eco Animal. Check out your portfolio center. Please also check ongoing floating volatility patterns of First and Eco Animal.

Diversification Opportunities for First and Eco Animal

-0.23

Correlation Coefficient

First  Eco Animal

Very good diversification

The 3 months correlation between First and Eco is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding First Class Metals and Eco Animal Health in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eco Animal Health and First 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 First Class Metals are associated (or correlated) with Eco Animal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eco Animal Health has no effect on the direction of First i.e., First and Eco Animal go up and down completely randomly.

Pair Corralation between First and Eco Animal

Assuming the 90 days trading horizon First Class Metals is expected to generate 2.42 times more return on investment than Eco Animal. However, First is 2.42 times more volatile than Eco Animal Health. It trades about -0.02 of its potential returns per unit of risk. Eco Animal Health is currently generating about -0.05 per unit of risk. If you would invest  195.00  in First Class Metals on October 7, 2024 and sell it today you would lose (15.00) from holding First Class Metals or give up 7.69% of portfolio value over 90 days.

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

First Class Metals  vs.  Eco Animal Health

First Class Metals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days First Class Metals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, First is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Eco Animal Health

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Eco Animal Health are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, Eco Animal may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with First and Eco Animal

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

The idea behind First Class Metals and Eco Animal Health 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.