Correlation Between ETC Group and ETC On

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

By analyzing existing cross correlation between ETC Group Global and ETC on CMCI, you can compare the effects of market volatilities on ETC Group and ETC On 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 ETC Group with a short position of ETC On. Check out your portfolio center. Please also check ongoing floating volatility patterns of ETC Group and ETC On.

Diversification Opportunities for ETC Group and ETC On

0.53

Correlation Coefficient

ETC Group  ETC On

Very weak diversification

The 3 months correlation between ETC and ETC is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding ETC Group Global and ETC on CMCI in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ETC on CMCI and ETC Group 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 ETC Group Global are associated (or correlated) with ETC On. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ETC on CMCI has no effect on the direction of ETC Group i.e., ETC Group and ETC On go up and down completely randomly.

Pair Corralation between ETC Group and ETC On

Assuming the 90 days trading horizon ETC Group Global is expected to generate 3.01 times more return on investment than ETC On. However, ETC Group is 3.01 times more volatile than ETC on CMCI. It trades about 0.14 of its potential returns per unit of risk. ETC on CMCI is currently generating about 0.31 per unit of risk. If you would invest  1,090  in ETC Group Global on September 5, 2024 and sell it today you would earn a total of  158.00  from holding ETC Group Global or generate 14.5% return on investment over 90 days.

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

ETC Group Global  vs.  ETC on CMCI

ETC Group Global

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in ETC Group Global are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, ETC Group unveiled solid returns over the last few months and may actually be approaching a breakup point.

ETC on CMCI

Risk-Adjusted Performance

24 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in ETC on CMCI are ranked lower than 24 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, ETC On may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with ETC Group and ETC On

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

The idea behind ETC Group Global and ETC on CMCI 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.