Correlation Between SafePal and EMERCOIN

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

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

Diversification Opportunities for SafePal and EMERCOIN

0.18

Correlation Coefficient

SafePal  EMERCOIN

Average diversification

The 3 months correlation between SafePal and EMERCOIN is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding SafePal and EMERCOIN in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EMERCOIN and SafePal 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 SafePal are associated (or correlated) with EMERCOIN. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EMERCOIN has no effect on the direction of SafePal i.e., SafePal and EMERCOIN go up and down completely randomly.

Pair Corralation between SafePal and EMERCOIN

Assuming the 90 days trading horizon SafePal is expected to generate 91.7 times less return on investment than EMERCOIN. But when comparing it to its historical volatility, SafePal is 10.6 times less risky than EMERCOIN. It trades about 0.02 of its potential returns per unit of risk. EMERCOIN is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  0.99  in EMERCOIN on September 1, 2024 and sell it today you would earn a total of  0.48  from holding EMERCOIN or generate 48.48% return on investment over 90 days.

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

SafePal  vs.  EMERCOIN

SafePal

Risk-Adjusted Performance

1 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in SafePal are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, SafePal is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

EMERCOIN

Risk-Adjusted Performance

11 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in EMERCOIN are ranked lower than 11 (%) 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.

Pair Trading with SafePal and EMERCOIN

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

The idea behind SafePal and EMERCOIN 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.

Check out your portfolio center.

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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.