Correlation Between Eco Animal and Supermarket Income

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

By analyzing existing cross correlation between Eco Animal Health and Supermarket Income REIT, you can compare the effects of market volatilities on Eco Animal and Supermarket Income 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 Eco Animal with a short position of Supermarket Income. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eco Animal and Supermarket Income.

Diversification Opportunities for Eco Animal and Supermarket Income

0.68

Correlation Coefficient

Eco Animal  Supermarket Income

Poor diversification

The 3 months correlation between Eco and Supermarket is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Eco Animal Health and Supermarket Income REIT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Supermarket Income REIT and Eco Animal 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 Eco Animal Health are associated (or correlated) with Supermarket Income. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Supermarket Income REIT has no effect on the direction of Eco Animal i.e., Eco Animal and Supermarket Income go up and down completely randomly.

Pair Corralation between Eco Animal and Supermarket Income

Assuming the 90 days trading horizon Eco Animal Health is expected to under-perform the Supermarket Income. In addition to that, Eco Animal is 4.04 times more volatile than Supermarket Income REIT. It trades about -0.16 of its total potential returns per unit of risk. Supermarket Income REIT is currently generating about -0.08 per unit of volatility. If you would invest  7,424  in Supermarket Income REIT on September 5, 2024 and sell it today you would lose (404.00) from holding Supermarket Income REIT or give up 5.44% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.46%
Values	Daily Returns

Eco Animal Health  vs.  Supermarket Income REIT

Eco Animal Health

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Eco Animal Health has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Supermarket Income REIT

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Supermarket Income REIT has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Supermarket Income is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Eco Animal and Supermarket Income

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

The idea behind Eco Animal Health and Supermarket Income REIT 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.