Correlation Between Trupanion and Emera Maine

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

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

Diversification Opportunities for Trupanion and Emera Maine

0.83

Correlation Coefficient

Trupanion  Emera Maine

Very poor diversification

The 3 months correlation between Trupanion and Emera is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Trupanion and Emera Maine PFD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Emera Maine PFD and Trupanion 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 Trupanion are associated (or correlated) with Emera Maine. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Emera Maine PFD has no effect on the direction of Trupanion i.e., Trupanion and Emera Maine go up and down completely randomly.

Pair Corralation between Trupanion and Emera Maine

Given the investment horizon of 90 days Trupanion is expected to generate 12.86 times more return on investment than Emera Maine. However, Trupanion is 12.86 times more volatile than Emera Maine PFD. It trades about 0.03 of its potential returns per unit of risk. Emera Maine PFD is currently generating about 0.0 per unit of risk. If you would invest  4,568  in Trupanion on September 26, 2024 and sell it today you would earn a total of  532.00  from holding Trupanion or generate 11.65% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	25.81%
Values	Daily Returns

Trupanion  vs.  Emera Maine PFD

Trupanion

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Trupanion are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Trupanion reported solid returns over the last few months and may actually be approaching a breakup point.

Emera Maine PFD

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Emera Maine PFD has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy technical and fundamental indicators, Emera Maine is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Trupanion and Emera Maine

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

The idea behind Trupanion and Emera Maine PFD 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.