Correlation Between APro and Ecopro BM

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

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

Diversification Opportunities for APro and Ecopro BM

0.91

Correlation Coefficient

APro  Ecopro BM

Almost no diversification

The 3 months correlation between APro and Ecopro is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding APro Co and Ecopro BM Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ecopro BM and APro 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 APro Co are associated (or correlated) with Ecopro BM. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ecopro BM has no effect on the direction of APro i.e., APro and Ecopro BM go up and down completely randomly.

Pair Corralation between APro and Ecopro BM

Assuming the 90 days trading horizon APro Co is expected to under-perform the Ecopro BM. But the stock apears to be less risky and, when comparing its historical volatility, APro Co is 1.61 times less risky than Ecopro BM. The stock trades about -0.32 of its potential returns per unit of risk. The Ecopro BM Co is currently generating about -0.15 of returns per unit of risk over similar time horizon. If you would invest  17,020,000  in Ecopro BM Co on August 31, 2024 and sell it today you would lose (2,580,000) from holding Ecopro BM Co or give up 15.16% of portfolio value over 90 days.

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

APro Co  vs.  Ecopro BM Co

APro

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days APro Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in December 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Ecopro BM

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ecopro BM Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in December 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with APro and Ecopro BM

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

The idea behind APro Co and Ecopro BM 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.

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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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.