Correlation Between Entech SE and Innelec Multimedia

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

By analyzing existing cross correlation between Entech SE SAS and Innelec Multimedia, you can compare the effects of market volatilities on Entech SE and Innelec Multimedia 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 Entech SE with a short position of Innelec Multimedia. Check out your portfolio center. Please also check ongoing floating volatility patterns of Entech SE and Innelec Multimedia.

Diversification Opportunities for Entech SE and Innelec Multimedia

0.59

Correlation Coefficient

Entech SE  Innelec Multimedia

Very weak diversification

The 3 months correlation between Entech and Innelec is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Entech SE SAS and Innelec Multimedia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Innelec Multimedia and Entech SE 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 Entech SE SAS are associated (or correlated) with Innelec Multimedia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Innelec Multimedia has no effect on the direction of Entech SE i.e., Entech SE and Innelec Multimedia go up and down completely randomly.

Pair Corralation between Entech SE and Innelec Multimedia

Assuming the 90 days trading horizon Entech SE is expected to generate 1.86 times less return on investment than Innelec Multimedia. But when comparing it to its historical volatility, Entech SE SAS is 1.23 times less risky than Innelec Multimedia. It trades about 0.2 of its potential returns per unit of risk. Innelec Multimedia is currently generating about 0.29 of returns per unit of risk over similar time horizon. If you would invest  267.00  in Innelec Multimedia on October 3, 2024 and sell it today you would earn a total of  88.00  from holding Innelec Multimedia or generate 32.96% return on investment over 90 days.

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

Entech SE SAS  vs.  Innelec Multimedia

Entech SE SAS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Entech SE SAS has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Entech SE is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Innelec Multimedia

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Innelec Multimedia has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Innelec Multimedia is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Entech SE and Innelec Multimedia

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

The idea behind Entech SE SAS and Innelec Multimedia 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 Managers module to screen money managers from public funds and ETFs managed around the world.