Correlation Between Nable Communications and ECSTELECOM

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

By analyzing existing cross correlation between Nable Communications and ECSTELECOM Co, you can compare the effects of market volatilities on Nable Communications and ECSTELECOM 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 Nable Communications with a short position of ECSTELECOM. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nable Communications and ECSTELECOM.

Diversification Opportunities for Nable Communications and ECSTELECOM

0.22

Correlation Coefficient

Nable Communications  ECSTELECOM

Modest diversification

The 3 months correlation between Nable and ECSTELECOM is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Nable Communications and ECSTELECOM Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ECSTELECOM and Nable Communications 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 Nable Communications are associated (or correlated) with ECSTELECOM. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ECSTELECOM has no effect on the direction of Nable Communications i.e., Nable Communications and ECSTELECOM go up and down completely randomly.

Pair Corralation between Nable Communications and ECSTELECOM

Assuming the 90 days trading horizon Nable Communications is expected to under-perform the ECSTELECOM. But the stock apears to be less risky and, when comparing its historical volatility, Nable Communications is 1.38 times less risky than ECSTELECOM. The stock trades about -0.19 of its potential returns per unit of risk. The ECSTELECOM Co is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  282,500  in ECSTELECOM Co on October 8, 2024 and sell it today you would earn a total of  18,500  from holding ECSTELECOM Co or generate 6.55% return on investment over 90 days.

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

Nable Communications  vs.  ECSTELECOM Co

Nable Communications

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Nable Communications are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Nable Communications is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

ECSTELECOM

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in ECSTELECOM Co are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, ECSTELECOM is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Nable Communications and ECSTELECOM

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

The idea behind Nable Communications and ECSTELECOM Co 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.