Correlation Between ECHO INVESTMENT and CSL

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

By analyzing existing cross correlation between ECHO INVESTMENT ZY and CSL Limited, you can compare the effects of market volatilities on ECHO INVESTMENT and CSL 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 ECHO INVESTMENT with a short position of CSL. Check out your portfolio center. Please also check ongoing floating volatility patterns of ECHO INVESTMENT and CSL.

Diversification Opportunities for ECHO INVESTMENT and CSL

0.34

Correlation Coefficient

ECHO INVESTMENT  CSL

Weak diversification

The 3 months correlation between ECHO and CSL is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding ECHO INVESTMENT ZY and CSL Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CSL Limited and ECHO INVESTMENT 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 ECHO INVESTMENT ZY are associated (or correlated) with CSL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CSL Limited has no effect on the direction of ECHO INVESTMENT i.e., ECHO INVESTMENT and CSL go up and down completely randomly.

Pair Corralation between ECHO INVESTMENT and CSL

Assuming the 90 days horizon ECHO INVESTMENT ZY is expected to generate 1.3 times more return on investment than CSL. However, ECHO INVESTMENT is 1.3 times more volatile than CSL Limited. It trades about -0.07 of its potential returns per unit of risk. CSL Limited is currently generating about -0.17 per unit of risk. If you would invest  106.00  in ECHO INVESTMENT ZY on December 19, 2024 and sell it today you would lose (8.00) from holding ECHO INVESTMENT ZY or give up 7.55% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.33%
Values	Daily Returns

ECHO INVESTMENT ZY  vs.  CSL Limited

ECHO INVESTMENT ZY

Risk-Adjusted Performance

Very Weak

Over the last 90 days ECHO INVESTMENT ZY has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

CSL Limited

Risk-Adjusted Performance

Very Weak

Over the last 90 days CSL Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with ECHO INVESTMENT and CSL

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

The idea behind ECHO INVESTMENT ZY and CSL Limited 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.