Correlation Between CRA International and ESSEX

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

By analyzing existing cross correlation between CRA International and ESSEX PORTFOLIO L, you can compare the effects of market volatilities on CRA International and ESSEX 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 CRA International with a short position of ESSEX. Check out your portfolio center. Please also check ongoing floating volatility patterns of CRA International and ESSEX.

Diversification Opportunities for CRA International and ESSEX

-0.37

Correlation Coefficient

CRA International  ESSEX

Very good diversification

The 3 months correlation between CRA and ESSEX is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding CRA International and ESSEX PORTFOLIO L in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ESSEX PORTFOLIO L and CRA International 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 CRA International are associated (or correlated) with ESSEX. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ESSEX PORTFOLIO L has no effect on the direction of CRA International i.e., CRA International and ESSEX go up and down completely randomly.

Pair Corralation between CRA International and ESSEX

Given the investment horizon of 90 days CRA International is expected to generate 7.89 times more return on investment than ESSEX. However, CRA International is 7.89 times more volatile than ESSEX PORTFOLIO L. It trades about 0.08 of its potential returns per unit of risk. ESSEX PORTFOLIO L is currently generating about -0.01 per unit of risk. If you would invest  16,581  in CRA International on September 25, 2024 and sell it today you would earn a total of  1,874  from holding CRA International or generate 11.3% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	90.48%
Values	Daily Returns

CRA International  vs.  ESSEX PORTFOLIO L

CRA International

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in CRA International are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite fairly unsteady basic indicators, CRA International demonstrated solid returns over the last few months and may actually be approaching a breakup point.

ESSEX PORTFOLIO L

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with CRA International and ESSEX

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

The idea behind CRA International and ESSEX PORTFOLIO L 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.