Correlation Between United States and ECHO INVESTMENT

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

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

Diversification Opportunities for United States and ECHO INVESTMENT

0.7

Correlation Coefficient

United States  ECHO INVESTMENT

Poor diversification

The 3 months correlation between United and ECHO is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding United States Steel and ECHO INVESTMENT ZY in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ECHO INVESTMENT ZY and United States 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 United States Steel are associated (or correlated) with ECHO INVESTMENT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ECHO INVESTMENT ZY has no effect on the direction of United States i.e., United States and ECHO INVESTMENT go up and down completely randomly.

Pair Corralation between United States and ECHO INVESTMENT

Assuming the 90 days trading horizon United States Steel is expected to generate 1.61 times more return on investment than ECHO INVESTMENT. However, United States is 1.61 times more volatile than ECHO INVESTMENT ZY. It trades about 0.06 of its potential returns per unit of risk. ECHO INVESTMENT ZY is currently generating about 0.07 per unit of risk. If you would invest  3,445  in United States Steel on August 30, 2024 and sell it today you would earn a total of  308.00  from holding United States Steel or generate 8.94% return on investment over 90 days.

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

United States Steel  vs.  ECHO INVESTMENT ZY

United States Steel

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in United States Steel are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, United States may actually be approaching a critical reversion point that can send shares even higher in December 2024.

ECHO INVESTMENT ZY

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in ECHO INVESTMENT ZY are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, ECHO INVESTMENT may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with United States and ECHO INVESTMENT

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

The idea behind United States Steel and ECHO INVESTMENT ZY 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.