Correlation Between Eurocharm Holdings and Rexon Industrial

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

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

Diversification Opportunities for Eurocharm Holdings and Rexon Industrial

0.36

Correlation Coefficient

Eurocharm Holdings  Rexon Industrial

Weak diversification

The 3 months correlation between Eurocharm and Rexon is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Eurocharm Holdings Co and Rexon Industrial Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rexon Industrial Corp and Eurocharm Holdings 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 Eurocharm Holdings Co are associated (or correlated) with Rexon Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rexon Industrial Corp has no effect on the direction of Eurocharm Holdings i.e., Eurocharm Holdings and Rexon Industrial go up and down completely randomly.

Pair Corralation between Eurocharm Holdings and Rexon Industrial

Assuming the 90 days trading horizon Eurocharm Holdings Co is expected to generate 0.82 times more return on investment than Rexon Industrial. However, Eurocharm Holdings Co is 1.22 times less risky than Rexon Industrial. It trades about -0.07 of its potential returns per unit of risk. Rexon Industrial Corp is currently generating about -0.08 per unit of risk. If you would invest  21,750  in Eurocharm Holdings Co on October 26, 2024 and sell it today you would lose (1,550) from holding Eurocharm Holdings Co or give up 7.13% of portfolio value over 90 days.

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

Eurocharm Holdings Co  vs.  Rexon Industrial Corp

Eurocharm Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Eurocharm Holdings Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Rexon Industrial Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Rexon Industrial Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Pair Trading with Eurocharm Holdings and Rexon Industrial

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

The idea behind Eurocharm Holdings Co and Rexon Industrial Corp 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.