Correlation Between Financial and Eddy Smart

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

By analyzing existing cross correlation between Financial 15 Split and Eddy Smart Home, you can compare the effects of market volatilities on Financial and Eddy Smart 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 Financial with a short position of Eddy Smart. Check out your portfolio center. Please also check ongoing floating volatility patterns of Financial and Eddy Smart.

Diversification Opportunities for Financial and Eddy Smart

0.25

Correlation Coefficient

Financial  Eddy Smart

Modest diversification

The 3 months correlation between Financial and Eddy is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Financial 15 Split and Eddy Smart Home in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eddy Smart Home and Financial 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 Financial 15 Split are associated (or correlated) with Eddy Smart. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eddy Smart Home has no effect on the direction of Financial i.e., Financial and Eddy Smart go up and down completely randomly.

Pair Corralation between Financial and Eddy Smart

Assuming the 90 days trading horizon Financial is expected to generate 1.5 times less return on investment than Eddy Smart. But when comparing it to its historical volatility, Financial 15 Split is 26.84 times less risky than Eddy Smart. It trades about 0.42 of its potential returns per unit of risk. Eddy Smart Home is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  255.00  in Eddy Smart Home on November 29, 2024 and sell it today you would lose (14.00) from holding Eddy Smart Home or give up 5.49% of portfolio value over 90 days.

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

Financial 15 Split  vs.  Eddy Smart Home

Financial 15 Split

Risk-Adjusted Performance

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Financial 15 Split are ranked lower than 33 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Financial may actually be approaching a critical reversion point that can send shares even higher in March 2025.

Eddy Smart Home

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Eddy Smart Home are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Eddy Smart may actually be approaching a critical reversion point that can send shares even higher in March 2025.

Pair Trading with Financial and Eddy Smart

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

The idea behind Financial 15 Split and Eddy Smart Home 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.