Correlation Between Erie Indemnity and Marcus

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Can any of the company-specific risk be diversified away by investing in both Erie Indemnity and Marcus 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 Erie Indemnity and Marcus into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Erie Indemnity and Marcus, you can compare the effects of market volatilities on Erie Indemnity and Marcus 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 Erie Indemnity with a short position of Marcus. Check out your portfolio center. Please also check ongoing floating volatility patterns of Erie Indemnity and Marcus.

Diversification Opportunities for Erie Indemnity and Marcus

0.35
  Correlation Coefficient

Weak diversification

The 3 months correlation between Erie and Marcus is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Erie Indemnity and Marcus in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Marcus and Erie Indemnity 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 Erie Indemnity are associated (or correlated) with Marcus. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Marcus has no effect on the direction of Erie Indemnity i.e., Erie Indemnity and Marcus go up and down completely randomly.

Pair Corralation between Erie Indemnity and Marcus

Given the investment horizon of 90 days Erie Indemnity is expected to generate 1.77 times more return on investment than Marcus. However, Erie Indemnity is 1.77 times more volatile than Marcus. It trades about 0.21 of its potential returns per unit of risk. Marcus is currently generating about 0.08 per unit of risk. If you would invest  34,267  in Erie Indemnity on December 29, 2023 and sell it today you would earn a total of  6,550  from holding Erie Indemnity or generate 19.11% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Erie Indemnity  vs.  Marcus

 Performance 
       Timeline  
Erie Indemnity 

Risk-Adjusted Performance

14 of 100

 
Low
 
High
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Erie Indemnity are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of rather abnormal forward indicators, Erie Indemnity exhibited solid returns over the last few months and may actually be approaching a breakup point.
Marcus 

Risk-Adjusted Performance

0 of 100

 
Low
 
High
Very Weak
Over the last 90 days Marcus has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable fundamental indicators, Marcus is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Erie Indemnity and Marcus Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Erie Indemnity and Marcus

The main advantage of trading using opposite Erie Indemnity and Marcus positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Erie Indemnity position performs unexpectedly, Marcus 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 Marcus will offset losses from the drop in Marcus' long position.
The idea behind Erie Indemnity and Marcus 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.

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