Correlation Between Holiday Island and EGRNF

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

By analyzing existing cross correlation between Holiday Island Holdings and EGRNF, you can compare the effects of market volatilities on Holiday Island and EGRNF 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 Holiday Island with a short position of EGRNF. Check out your portfolio center. Please also check ongoing floating volatility patterns of Holiday Island and EGRNF.

Diversification Opportunities for Holiday Island and EGRNF

0.42

Correlation Coefficient

Holiday Island  EGRNF

Very weak diversification

The 3 months correlation between Holiday and EGRNF is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Holiday Island Holdings and EGRNF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EGRNF and Holiday Island 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 Holiday Island Holdings are associated (or correlated) with EGRNF. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EGRNF has no effect on the direction of Holiday Island i.e., Holiday Island and EGRNF go up and down completely randomly.

Pair Corralation between Holiday Island and EGRNF

Given the investment horizon of 90 days Holiday Island is expected to generate 31.71 times less return on investment than EGRNF. But when comparing it to its historical volatility, Holiday Island Holdings is 11.15 times less risky than EGRNF. It trades about 0.05 of its potential returns per unit of risk. EGRNF is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  0.30  in EGRNF on September 3, 2024 and sell it today you would lose (0.27) from holding EGRNF or give up 90.0% of portfolio value over 90 days.

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

Holiday Island Holdings  vs.  EGRNF

Holiday Island Holdings

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Holiday Island Holdings are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak technical indicators, Holiday Island demonstrated solid returns over the last few months and may actually be approaching a breakup point.

EGRNF

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in EGRNF are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, EGRNF reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Holiday Island and EGRNF

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

The idea behind Holiday Island Holdings and EGRNF 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.