Correlation Between Entech SE and Neotion SA

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

Diversification Opportunities for Entech SE and Neotion SA

-0.72

Correlation Coefficient

Entech SE  Neotion SA

Pay attention - limited upside

The 3 months correlation between Entech and Neotion is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding Entech SE SAS and Neotion SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Neotion SA 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 Neotion SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Neotion SA has no effect on the direction of Entech SE i.e., Entech SE and Neotion SA go up and down completely randomly.

Pair Corralation between Entech SE and Neotion SA

Assuming the 90 days trading horizon Entech SE SAS is expected to generate 0.46 times more return on investment than Neotion SA. However, Entech SE SAS is 2.19 times less risky than Neotion SA. It trades about 0.0 of its potential returns per unit of risk. Neotion SA is currently generating about -0.01 per unit of risk. If you would invest  730.00  in Entech SE SAS on October 5, 2024 and sell it today you would lose (130.00) from holding Entech SE SAS or give up 17.81% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	97.45%
Values	Daily Returns

Entech SE SAS  vs.  Neotion SA

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.

Neotion SA

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Neotion SA are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Neotion SA reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Entech SE and Neotion SA

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

The idea behind Entech SE SAS and Neotion SA 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.