Correlation Between Pulse Oil and Eddy Smart

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

By analyzing existing cross correlation between Pulse Oil Corp and Eddy Smart Home, you can compare the effects of market volatilities on Pulse Oil and Eddy Smart 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 Pulse Oil with a short position of Eddy Smart. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pulse Oil and Eddy Smart.

Diversification Opportunities for Pulse Oil and Eddy Smart

0.6

Correlation Coefficient

Pulse Oil  Eddy Smart

Poor diversification

The 3 months correlation between Pulse and Eddy is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Pulse Oil Corp and Eddy Smart Home in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eddy Smart Home and Pulse Oil 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 Pulse Oil Corp are associated (or correlated) with Eddy Smart. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eddy Smart Home has no effect on the direction of Pulse Oil i.e., Pulse Oil and Eddy Smart go up and down completely randomly.

Pair Corralation between Pulse Oil and Eddy Smart

Assuming the 90 days horizon Pulse Oil Corp is expected to generate 3.3 times more return on investment than Eddy Smart. However, Pulse Oil is 3.3 times more volatile than Eddy Smart Home. It trades about -0.01 of its potential returns per unit of risk. Eddy Smart Home is currently generating about -0.13 per unit of risk. If you would invest  3.00  in Pulse Oil Corp on September 4, 2024 and sell it today you would lose (1.50) from holding Pulse Oil Corp or give up 50.0% of portfolio value over 90 days.

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

Pulse Oil Corp  vs.  Eddy Smart Home

Pulse Oil Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Pulse Oil Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Pulse Oil is not utilizing all of its potentials. The recent stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Eddy Smart Home

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Eddy Smart Home has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Pulse Oil and Eddy Smart

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

The idea behind Pulse Oil Corp and Eddy Smart Home 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.