Can any of the company-specific risk be diversified away by investing in both Target and Evgo 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 Target and Evgo into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Target and Evgo Inc, you can compare the effects of market volatilities on Target and Evgo 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 Target with a short position of Evgo. Check out your portfolio center. Please also check ongoing floating volatility patterns of Target and Evgo.
The 3 months correlation between Target and Evgo is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Target and Evgo Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Evgo Inc and Target 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 Target are associated (or correlated) with Evgo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Evgo Inc has no effect on the direction of Target i.e., Target and Evgo go up and down completely randomly.
Considering the 90-day investment horizon Target is expected to under-perform the Evgo. But the stock apears to be less risky and, when comparing its historical volatility, Target is 2.7 times less risky than Evgo. The stock trades about -0.04 of its potential returns per unit of risk. The Evgo Inc is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 199.00 in Evgo Inc on March 6, 2024 and sell it today you would lose (4.00) from holding Evgo Inc or give up 2.01% of portfolio value over 90 days.
Over the last 90 days Target has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's technical and fundamental indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.
Over the last 90 days Evgo Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's technical and fundamental indicators remain very healthy which may send shares a bit higher in July 2024. The recent disarray may also be a sign of long period up-swing for the firm investors.