Correlation Between ECOVE Environment and Tang Eng

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

By analyzing existing cross correlation between ECOVE Environment Corp and Tang Eng Iron, you can compare the effects of market volatilities on ECOVE Environment and Tang Eng 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 ECOVE Environment with a short position of Tang Eng. Check out your portfolio center. Please also check ongoing floating volatility patterns of ECOVE Environment and Tang Eng.

Diversification Opportunities for ECOVE Environment and Tang Eng

-0.4

Correlation Coefficient

ECOVE Environment  Tang Eng

Very good diversification

The 3 months correlation between ECOVE and Tang is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding ECOVE Environment Corp and Tang Eng Iron in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tang Eng Iron and ECOVE Environment 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 ECOVE Environment Corp are associated (or correlated) with Tang Eng. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tang Eng Iron has no effect on the direction of ECOVE Environment i.e., ECOVE Environment and Tang Eng go up and down completely randomly.

Pair Corralation between ECOVE Environment and Tang Eng

Assuming the 90 days trading horizon ECOVE Environment Corp is expected to generate 0.57 times more return on investment than Tang Eng. However, ECOVE Environment Corp is 1.74 times less risky than Tang Eng. It trades about 0.02 of its potential returns per unit of risk. Tang Eng Iron is currently generating about -0.08 per unit of risk. If you would invest  28,400  in ECOVE Environment Corp on October 6, 2024 and sell it today you would earn a total of  100.00  from holding ECOVE Environment Corp or generate 0.35% return on investment over 90 days.

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

ECOVE Environment Corp  vs.  Tang Eng Iron

ECOVE Environment Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ECOVE Environment Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, ECOVE Environment is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Tang Eng Iron

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tang Eng Iron has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Tang Eng is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with ECOVE Environment and Tang Eng

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

The idea behind ECOVE Environment Corp and Tang Eng Iron 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.