Correlation Between East Africa and American CuMo
Can any of the company-specific risk be diversified away by investing in both East Africa and American CuMo 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 East Africa and American CuMo into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between East Africa Metals and American CuMo Mining, you can compare the effects of market volatilities on East Africa and American CuMo 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 East Africa with a short position of American CuMo. Check out your portfolio center. Please also check ongoing floating volatility patterns of East Africa and American CuMo.
Diversification Opportunities for East Africa and American CuMo
-0.11 | Correlation Coefficient |
Good diversification
The 3 months correlation between East and American is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding East Africa Metals and American CuMo Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American CuMo Mining and East Africa 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 East Africa Metals are associated (or correlated) with American CuMo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American CuMo Mining has no effect on the direction of East Africa i.e., East Africa and American CuMo go up and down completely randomly.
Pair Corralation between East Africa and American CuMo
Assuming the 90 days horizon East Africa Metals is expected to generate 1.39 times more return on investment than American CuMo. However, East Africa is 1.39 times more volatile than American CuMo Mining. It trades about 0.08 of its potential returns per unit of risk. American CuMo Mining is currently generating about 0.03 per unit of risk. If you would invest 5.20 in East Africa Metals on February 20, 2024 and sell it today you would earn a total of 1.06 from holding East Africa Metals or generate 20.38% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
East Africa Metals vs. American CuMo Mining
Performance |
Timeline |
East Africa Metals |
American CuMo Mining |
East Africa and American CuMo Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with East Africa and American CuMo
The main advantage of trading using opposite East Africa and American CuMo positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if East Africa position performs unexpectedly, American CuMo 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 American CuMo will offset losses from the drop in American CuMo's long position.East Africa vs. Anhui Conch Cement | East Africa vs. Asahi Kaisei Corp | East Africa vs. Alumina Limited | East Africa vs. Covestro ADR |
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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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.
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