Correlation Between Perpetual Credit and EROAD

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

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

Diversification Opportunities for Perpetual Credit and EROAD

-0.03

Correlation Coefficient

Perpetual Credit  EROAD

Good diversification

The 3 months correlation between Perpetual and EROAD is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Perpetual Credit Income and EROAD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EROAD and Perpetual Credit 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 Perpetual Credit Income are associated (or correlated) with EROAD. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EROAD has no effect on the direction of Perpetual Credit i.e., Perpetual Credit and EROAD go up and down completely randomly.

Pair Corralation between Perpetual Credit and EROAD

Assuming the 90 days trading horizon Perpetual Credit is expected to generate 1.64 times less return on investment than EROAD. But when comparing it to its historical volatility, Perpetual Credit Income is 3.72 times less risky than EROAD. It trades about 0.12 of its potential returns per unit of risk. EROAD is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  94.00  in EROAD on October 5, 2024 and sell it today you would earn a total of  7.00  from holding EROAD or generate 7.45% return on investment over 90 days.

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

Perpetual Credit Income  vs.  EROAD

Perpetual Credit Income

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Perpetual Credit Income are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain forward indicators, Perpetual Credit may actually be approaching a critical reversion point that can send shares even higher in February 2025.

EROAD

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in EROAD are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain fundamental indicators, EROAD may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Perpetual Credit and EROAD

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

The idea behind Perpetual Credit Income and EROAD 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.