Correlation Between ECHO INVESTMENT and United States

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

By analyzing existing cross correlation between ECHO INVESTMENT ZY and United States Steel, you can compare the effects of market volatilities on ECHO INVESTMENT and United States 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 ECHO INVESTMENT with a short position of United States. Check out your portfolio center. Please also check ongoing floating volatility patterns of ECHO INVESTMENT and United States.

Diversification Opportunities for ECHO INVESTMENT and United States

0.7

Correlation Coefficient

ECHO INVESTMENT  United States

Poor diversification

The 3 months correlation between ECHO and United is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding ECHO INVESTMENT ZY and United States Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United States Steel and ECHO INVESTMENT 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 ECHO INVESTMENT ZY are associated (or correlated) with United States. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United States Steel has no effect on the direction of ECHO INVESTMENT i.e., ECHO INVESTMENT and United States go up and down completely randomly.

Pair Corralation between ECHO INVESTMENT and United States

Assuming the 90 days horizon ECHO INVESTMENT is expected to generate 22.84 times less return on investment than United States. But when comparing it to its historical volatility, ECHO INVESTMENT ZY is 1.83 times less risky than United States. It trades about 0.01 of its potential returns per unit of risk. United States Steel is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  3,524  in United States Steel on August 30, 2024 and sell it today you would earn a total of  229.00  from holding United States Steel or generate 6.5% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.65%
Values	Daily Returns

ECHO INVESTMENT ZY  vs.  United States Steel

ECHO INVESTMENT ZY

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in ECHO INVESTMENT ZY are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, ECHO INVESTMENT may actually be approaching a critical reversion point that can send shares even higher in December 2024.

United States Steel

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in United States Steel are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, United States may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with ECHO INVESTMENT and United States

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

The idea behind ECHO INVESTMENT ZY and United States Steel 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.