Correlation Between Globex Mining and Emera Pref

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

By analyzing existing cross correlation between Globex Mining Enterprises and Emera Pref A, you can compare the effects of market volatilities on Globex Mining and Emera Pref 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 Globex Mining with a short position of Emera Pref. Check out your portfolio center. Please also check ongoing floating volatility patterns of Globex Mining and Emera Pref.

Diversification Opportunities for Globex Mining and Emera Pref

0.66

Correlation Coefficient

Globex Mining  Emera Pref

Poor diversification

The 3 months correlation between Globex and Emera is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Globex Mining Enterprises and Emera Pref A in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Emera Pref A and Globex Mining 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 Globex Mining Enterprises are associated (or correlated) with Emera Pref. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Emera Pref A has no effect on the direction of Globex Mining i.e., Globex Mining and Emera Pref go up and down completely randomly.

Pair Corralation between Globex Mining and Emera Pref

Assuming the 90 days trading horizon Globex Mining is expected to generate 1.22 times less return on investment than Emera Pref. In addition to that, Globex Mining is 3.16 times more volatile than Emera Pref A. It trades about 0.05 of its total potential returns per unit of risk. Emera Pref A is currently generating about 0.21 per unit of volatility. If you would invest  1,518  in Emera Pref A on September 23, 2024 and sell it today you would earn a total of  107.00  from holding Emera Pref A or generate 7.05% return on investment over 90 days.

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

Globex Mining Enterprises  vs.  Emera Pref A

Globex Mining Enterprises

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Globex Mining Enterprises are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal basic indicators, Globex Mining displayed solid returns over the last few months and may actually be approaching a breakup point.

Emera Pref A

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Emera Pref A are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, Emera Pref may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Globex Mining and Emera Pref

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

The idea behind Globex Mining Enterprises and Emera Pref A 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.