Correlation Between ECHO INVESTMENT and OtelloASA

Can any of the company-specific risk be diversified away by investing in both ECHO INVESTMENT and OtelloASA 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 OtelloASA 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 Otello ASA, you can compare the effects of market volatilities on ECHO INVESTMENT and OtelloASA 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 OtelloASA. Check out your portfolio center. Please also check ongoing floating volatility patterns of ECHO INVESTMENT and OtelloASA.

Diversification Opportunities for ECHO INVESTMENT and OtelloASA

0.43

Correlation Coefficient

ECHO INVESTMENT  OtelloASA

Very weak diversification

The 3 months correlation between ECHO and OtelloASA is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding ECHO INVESTMENT ZY and Otello ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Otello ASA 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 OtelloASA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Otello ASA has no effect on the direction of ECHO INVESTMENT i.e., ECHO INVESTMENT and OtelloASA go up and down completely randomly.

Pair Corralation between ECHO INVESTMENT and OtelloASA

Assuming the 90 days horizon ECHO INVESTMENT ZY is expected to under-perform the OtelloASA. In addition to that, ECHO INVESTMENT is 1.46 times more volatile than Otello ASA. It trades about -0.11 of its total potential returns per unit of risk. Otello ASA is currently generating about 0.03 per unit of volatility. If you would invest  63.00  in Otello ASA on December 21, 2024 and sell it today you would earn a total of  1.00  from holding Otello ASA or generate 1.59% return on investment over 90 days.

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

ECHO INVESTMENT ZY  vs.  Otello ASA

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 fragile 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.

Otello ASA

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Otello ASA are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, OtelloASA is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with ECHO INVESTMENT and OtelloASA

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

The idea behind ECHO INVESTMENT ZY and Otello ASA 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.