Correlation Between Eit Environmental and Invengo Information

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

By analyzing existing cross correlation between Eit Environmental Development and Invengo Information Technology, you can compare the effects of market volatilities on Eit Environmental and Invengo Information 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 Eit Environmental with a short position of Invengo Information. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eit Environmental and Invengo Information.

Diversification Opportunities for Eit Environmental and Invengo Information

0.69

Correlation Coefficient

Eit Environmental  Invengo Information

Poor diversification

The 3 months correlation between Eit and Invengo is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Eit Environmental Development and Invengo Information Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invengo Information and Eit Environmental 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 Eit Environmental Development are associated (or correlated) with Invengo Information. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invengo Information has no effect on the direction of Eit Environmental i.e., Eit Environmental and Invengo Information go up and down completely randomly.

Pair Corralation between Eit Environmental and Invengo Information

Assuming the 90 days trading horizon Eit Environmental Development is expected to generate 0.87 times more return on investment than Invengo Information. However, Eit Environmental Development is 1.15 times less risky than Invengo Information. It trades about 0.07 of its potential returns per unit of risk. Invengo Information Technology is currently generating about 0.01 per unit of risk. If you would invest  1,616  in Eit Environmental Development on December 24, 2024 and sell it today you would earn a total of  122.00  from holding Eit Environmental Development or generate 7.55% return on investment over 90 days.

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

Eit Environmental Development  vs.  Invengo Information Technology

Eit Environmental

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Eit Environmental Development are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Eit Environmental may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Invengo Information

Risk-Adjusted Performance

Very Weak

Over the last 90 days Invengo Information Technology has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Invengo Information is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Eit Environmental and Invengo Information

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

The idea behind Eit Environmental Development and Invengo Information Technology 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.