Can any of the company-specific risk be diversified away by investing in both Erasca and Dynatronics 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 Erasca and Dynatronics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Erasca Inc and Dynatronics, you can compare the effects of market volatilities on Erasca and Dynatronics 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 Erasca with a short position of Dynatronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Erasca and Dynatronics.
Diversification Opportunities for Erasca and Dynatronics
The 3 months correlation between Erasca and Dynatronics is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Erasca Inc and Dynatronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dynatronics and Erasca 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 Erasca Inc are associated (or correlated) with Dynatronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dynatronics has no effect on the direction of Erasca i.e., Erasca and Dynatronics go up and down completely randomly.
Given the investment horizon of 90 days Erasca Inc is expected to generate 0.94 times more return on investment than Dynatronics. However, Erasca Inc is 1.06 times less risky than Dynatronics. It trades about 0.0 of its potential returns per unit of risk. Dynatronics is currently generating about -0.06 per unit of risk. If you would invest 482.00 in Erasca Inc on March 6, 2024 and sell it today you would lose (224.00) from holding Erasca Inc or give up 46.47% of portfolio value over 90 days.
Compared to the overall equity markets, risk-adjusted returns on investments in Erasca Inc are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, Erasca unveiled solid returns over the last few months and may actually be approaching a breakup point.
Compared to the overall equity markets, risk-adjusted returns on investments in Dynatronics are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively abnormal basic indicators, Dynatronics may actually be approaching a critical reversion point that can send shares even higher in July 2024.