Correlation Between ATRenew and EMBARQ

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

By analyzing existing cross correlation between ATRenew Inc DRC and EMBARQ P 7995, you can compare the effects of market volatilities on ATRenew and EMBARQ 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 ATRenew with a short position of EMBARQ. Check out your portfolio center. Please also check ongoing floating volatility patterns of ATRenew and EMBARQ.

Diversification Opportunities for ATRenew and EMBARQ

0.26

Correlation Coefficient

ATRenew  EMBARQ

Modest diversification

The 3 months correlation between ATRenew and EMBARQ is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding ATRenew Inc DRC and EMBARQ P 7995 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EMBARQ P 7995 and ATRenew 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 ATRenew Inc DRC are associated (or correlated) with EMBARQ. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EMBARQ P 7995 has no effect on the direction of ATRenew i.e., ATRenew and EMBARQ go up and down completely randomly.

Pair Corralation between ATRenew and EMBARQ

Given the investment horizon of 90 days ATRenew Inc DRC is expected to generate 1.25 times more return on investment than EMBARQ. However, ATRenew is 1.25 times more volatile than EMBARQ P 7995. It trades about 0.12 of its potential returns per unit of risk. EMBARQ P 7995 is currently generating about 0.0 per unit of risk. If you would invest  228.00  in ATRenew Inc DRC on September 18, 2024 and sell it today you would earn a total of  74.00  from holding ATRenew Inc DRC or generate 32.46% return on investment over 90 days.

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

ATRenew Inc DRC  vs.  EMBARQ P 7995

ATRenew Inc DRC

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ATRenew Inc DRC are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain basic indicators, ATRenew exhibited solid returns over the last few months and may actually be approaching a breakup point.

EMBARQ P 7995

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days EMBARQ P 7995 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, EMBARQ is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with ATRenew and EMBARQ

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

The idea behind ATRenew Inc DRC and EMBARQ P 7995 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.

Check out your portfolio center.

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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.