Correlation Between Prime Lands and E M

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

By analyzing existing cross correlation between Prime Lands Residencies and E M L, you can compare the effects of market volatilities on Prime Lands and E M 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 Prime Lands with a short position of E M. Check out your portfolio center. Please also check ongoing floating volatility patterns of Prime Lands and E M.

Diversification Opportunities for Prime Lands and E M

0.55

Correlation Coefficient

Prime Lands  E M

Very weak diversification

The 3 months correlation between Prime and EMLN0000 is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Prime Lands Residencies and E M L in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on E M L and Prime Lands 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 Prime Lands Residencies are associated (or correlated) with E M. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of E M L has no effect on the direction of Prime Lands i.e., Prime Lands and E M go up and down completely randomly.

Pair Corralation between Prime Lands and E M

Assuming the 90 days trading horizon Prime Lands Residencies is expected to generate 0.71 times more return on investment than E M. However, Prime Lands Residencies is 1.4 times less risky than E M. It trades about 0.21 of its potential returns per unit of risk. E M L is currently generating about 0.13 per unit of risk. If you would invest  960.00  in Prime Lands Residencies on September 24, 2024 and sell it today you would earn a total of  140.00  from holding Prime Lands Residencies or generate 14.58% return on investment over 90 days.

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

Prime Lands Residencies  vs.  E M L

Prime Lands Residencies

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Prime Lands Residencies are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Prime Lands sustained solid returns over the last few months and may actually be approaching a breakup point.

E M L

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in E M L are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, E M may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Prime Lands and E M

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

The idea behind Prime Lands Residencies and E M L 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.