Correlation Between Earth Alive and ISign Media

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

By analyzing existing cross correlation between Earth Alive Clean and iSign Media Solutions, you can compare the effects of market volatilities on Earth Alive and ISign Media 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 Earth Alive with a short position of ISign Media. Check out your portfolio center. Please also check ongoing floating volatility patterns of Earth Alive and ISign Media.

Diversification Opportunities for Earth Alive and ISign Media

0.0

Correlation Coefficient

Earth Alive  ISign Media

Pay attention - limited upside

The 3 months correlation between Earth and ISign is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Earth Alive Clean and iSign Media Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iSign Media Solutions and Earth Alive 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 Earth Alive Clean are associated (or correlated) with ISign Media. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iSign Media Solutions has no effect on the direction of Earth Alive i.e., Earth Alive and ISign Media go up and down completely randomly.

Pair Corralation between Earth Alive and ISign Media

Assuming the 90 days horizon Earth Alive is expected to generate 3.92 times less return on investment than ISign Media. But when comparing it to its historical volatility, Earth Alive Clean is 3.08 times less risky than ISign Media. It trades about 0.05 of its potential returns per unit of risk. iSign Media Solutions is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  2.00  in iSign Media Solutions on September 26, 2024 and sell it today you would earn a total of  1,377  from holding iSign Media Solutions or generate 68850.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Earth Alive Clean  vs.  iSign Media Solutions

Earth Alive Clean

Risk-Adjusted Performance

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Very Weak

Over the last 90 days Earth Alive Clean has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Earth Alive is not utilizing all of its potentials. The recent stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

iSign Media Solutions

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iSign Media Solutions has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, ISign Media is not utilizing all of its potentials. The recent stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Earth Alive and ISign Media

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

The idea behind Earth Alive Clean and iSign Media Solutions 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .