Correlation Between EMERCOIN and ABBC

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

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

Diversification Opportunities for EMERCOIN and ABBC

-0.02

Correlation Coefficient

EMERCOIN  ABBC

Good diversification

The 3 months correlation between EMERCOIN and ABBC is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding EMERCOIN and ABBC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ABBC and EMERCOIN 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 EMERCOIN are associated (or correlated) with ABBC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ABBC has no effect on the direction of EMERCOIN i.e., EMERCOIN and ABBC go up and down completely randomly.

Pair Corralation between EMERCOIN and ABBC

Assuming the 90 days trading horizon EMERCOIN is expected to generate 5.68 times more return on investment than ABBC. However, EMERCOIN is 5.68 times more volatile than ABBC. It trades about 0.11 of its potential returns per unit of risk. ABBC is currently generating about -0.01 per unit of risk. If you would invest  1.00  in EMERCOIN on August 30, 2024 and sell it today you would lose (0.35) from holding EMERCOIN or give up 34.53% of portfolio value over 90 days.

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

EMERCOIN  vs.  ABBC

EMERCOIN

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in EMERCOIN are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite fairly unsteady fundamental indicators, EMERCOIN demonstrated solid returns over the last few months and may actually be approaching a breakup point.

ABBC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ABBC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental indicators, ABBC is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with EMERCOIN and ABBC

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

The idea behind EMERCOIN and ABBC 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.