Correlation Between Eureka Design and Union Petrochemical
Can any of the company-specific risk be diversified away by investing in both Eureka Design and Union Petrochemical 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 Eureka Design and Union Petrochemical into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Eureka Design Public and Union Petrochemical Public, you can compare the effects of market volatilities on Eureka Design and Union Petrochemical 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 Eureka Design with a short position of Union Petrochemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eureka Design and Union Petrochemical.
Diversification Opportunities for Eureka Design and Union Petrochemical
-0.51 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Eureka and Union is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Eureka Design Public and Union Petrochemical Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Union Petrochemical and Eureka Design 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 Eureka Design Public are associated (or correlated) with Union Petrochemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Union Petrochemical has no effect on the direction of Eureka Design i.e., Eureka Design and Union Petrochemical go up and down completely randomly.
Pair Corralation between Eureka Design and Union Petrochemical
Assuming the 90 days trading horizon Eureka Design Public is expected to generate 0.38 times more return on investment than Union Petrochemical. However, Eureka Design Public is 2.64 times less risky than Union Petrochemical. It trades about 0.18 of its potential returns per unit of risk. Union Petrochemical Public is currently generating about -0.1 per unit of risk. If you would invest 88.00 in Eureka Design Public on December 1, 2024 and sell it today you would earn a total of 9.00 from holding Eureka Design Public or generate 10.23% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Very Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Eureka Design Public vs. Union Petrochemical Public
Performance |
Timeline |
Eureka Design Public |
Union Petrochemical |
Eureka Design and Union Petrochemical Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Eureka Design and Union Petrochemical
The main advantage of trading using opposite Eureka Design and Union Petrochemical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Eureka Design position performs unexpectedly, Union Petrochemical 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 Union Petrochemical will offset losses from the drop in Union Petrochemical's long position.Eureka Design vs. Union Petrochemical Public | Eureka Design vs. TV Thunder Public | Eureka Design vs. Exotic Food Public | Eureka Design vs. TWZ Public |
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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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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