Correlation Between E Home and ARC Document

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

By analyzing existing cross correlation between E Home Household Service and ARC Document Solutions, you can compare the effects of market volatilities on E Home and ARC Document 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 E Home with a short position of ARC Document. Check out your portfolio center. Please also check ongoing floating volatility patterns of E Home and ARC Document.

Diversification Opportunities for E Home and ARC Document

0.61

Correlation Coefficient

E Home  ARC Document

Poor diversification

The 3 months correlation between EJH and ARC is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding E Home Household Service and ARC Document Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ARC Document Solutions and E Home 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 E Home Household Service are associated (or correlated) with ARC Document. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ARC Document Solutions has no effect on the direction of E Home i.e., E Home and ARC Document go up and down completely randomly.

Pair Corralation between E Home and ARC Document

Considering the 90-day investment horizon E Home Household Service is expected to generate 4.9 times more return on investment than ARC Document. However, E Home is 4.9 times more volatile than ARC Document Solutions. It trades about 0.06 of its potential returns per unit of risk. ARC Document Solutions is currently generating about -0.11 per unit of risk. If you would invest  275.00  in E Home Household Service on January 17, 2024 and sell it today you would earn a total of  35.00  from holding E Home Household Service or generate 12.73% return on investment over 90 days.

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

E Home Household Service  vs.  ARC Document Solutions

E Home Household

Risk-Adjusted Performance

4 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in E Home Household Service are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite fairly fragile forward-looking indicators, E Home demonstrated solid returns over the last few months and may actually be approaching a breakup point.

ARC Document Solutions

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ARC Document Solutions has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with E Home and ARC Document

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

The idea behind E Home Household Service and ARC Document Solutions 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.