Correlation Between Uniteds and Economic Investment

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

By analyzing existing cross correlation between Uniteds Limited and Economic Investment Trust, you can compare the effects of market volatilities on Uniteds and Economic Investment 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 Uniteds with a short position of Economic Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Uniteds and Economic Investment.

Diversification Opportunities for Uniteds and Economic Investment

0.34

Correlation Coefficient

Uniteds  Economic Investment

Weak diversification

The 3 months correlation between Uniteds and Economic is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Uniteds Limited and Economic Investment Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Economic Investment Trust and Uniteds 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 Uniteds Limited are associated (or correlated) with Economic Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Economic Investment Trust has no effect on the direction of Uniteds i.e., Uniteds and Economic Investment go up and down completely randomly.

Pair Corralation between Uniteds and Economic Investment

Assuming the 90 days trading horizon Uniteds Limited is expected to under-perform the Economic Investment. But the stock apears to be less risky and, when comparing its historical volatility, Uniteds Limited is 1.25 times less risky than Economic Investment. The stock trades about -0.05 of its potential returns per unit of risk. The Economic Investment Trust is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  16,234  in Economic Investment Trust on December 30, 2024 and sell it today you would earn a total of  6.00  from holding Economic Investment Trust or generate 0.04% return on investment over 90 days.

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

Uniteds Limited  vs.  Economic Investment Trust

Uniteds Limited

Risk-Adjusted Performance

Very Weak

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

Economic Investment Trust

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Economic Investment Trust are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Economic Investment is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Uniteds and Economic Investment

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

The idea behind Uniteds Limited and Economic Investment Trust 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 Transaction History module to view history of all your transactions and understand their impact on performance.