Correlation Between Equitable and Exchange Income

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

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

Diversification Opportunities for Equitable and Exchange Income

0.94

Correlation Coefficient

Equitable  Exchange Income

Almost no diversification

The 3 months correlation between Equitable and Exchange is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Equitable Group and Exchange Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Exchange Income and Equitable 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 Equitable Group are associated (or correlated) with Exchange Income. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Exchange Income has no effect on the direction of Equitable i.e., Equitable and Exchange Income go up and down completely randomly.

Pair Corralation between Equitable and Exchange Income

Assuming the 90 days trading horizon Equitable Group is expected to generate 1.02 times more return on investment than Exchange Income. However, Equitable is 1.02 times more volatile than Exchange Income. It trades about 0.28 of its potential returns per unit of risk. Exchange Income is currently generating about 0.25 per unit of risk. If you would invest  9,384  in Equitable Group on September 2, 2024 and sell it today you would earn a total of  1,866  from holding Equitable Group or generate 19.88% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	100.0%
Values	Daily Returns

Equitable Group  vs.  Exchange Income

Equitable Group

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Equitable Group are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. In spite of very weak fundamental drivers, Equitable displayed solid returns over the last few months and may actually be approaching a breakup point.

Exchange Income

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Exchange Income are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating technical and fundamental indicators, Exchange Income displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Equitable and Exchange Income

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

The idea behind Equitable Group and Exchange Income 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.