Correlation Between E I and CVR Partners

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

By analyzing existing cross correlation between E I du and CVR Partners LP, you can compare the effects of market volatilities on E I and CVR Partners 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 E I with a short position of CVR Partners. Check out your portfolio center. Please also check ongoing floating volatility patterns of E I and CVR Partners.

Diversification Opportunities for E I and CVR Partners

-0.64

Correlation Coefficient

E I  CVR Partners

Excellent diversification

The 3 months correlation between CTA-PA and CVR is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding E I du and CVR Partners LP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CVR Partners LP and E I 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 E I du are associated (or correlated) with CVR Partners. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CVR Partners LP has no effect on the direction of E I i.e., E I and CVR Partners go up and down completely randomly.

Pair Corralation between E I and CVR Partners

Assuming the 90 days trading horizon E I du is expected to under-perform the CVR Partners. But the preferred stock apears to be less risky and, when comparing its historical volatility, E I du is 1.24 times less risky than CVR Partners. The preferred stock trades about -0.09 of its potential returns per unit of risk. The CVR Partners LP is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  6,628  in CVR Partners LP on September 26, 2024 and sell it today you would earn a total of  967.00  from holding CVR Partners LP or generate 14.59% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.44%
Values	Daily Returns

E I du  vs.  CVR Partners LP

E I du

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days E I du has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Preferred Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

CVR Partners LP

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in CVR Partners LP are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, CVR Partners displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with E I and CVR Partners

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

The idea behind E I du and CVR Partners LP 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.