Correlation Between Entech SE and Forsee Power

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

Diversification Opportunities for Entech SE and Forsee Power

0.03
  Correlation Coefficient

Significant diversification

The 3 months correlation between Entech and Forsee is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Entech SE SAS and Forsee Power SAS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Forsee Power SAS 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 Forsee Power. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Forsee Power SAS has no effect on the direction of Entech SE i.e., Entech SE and Forsee Power go up and down completely randomly.

Pair Corralation between Entech SE and Forsee Power

Assuming the 90 days trading horizon Entech SE SAS is expected to generate 1.03 times more return on investment than Forsee Power. However, Entech SE is 1.03 times more volatile than Forsee Power SAS. It trades about -0.01 of its potential returns per unit of risk. Forsee Power SAS is currently generating about -0.12 per unit of risk. If you would invest  937.00  in Entech SE SAS on October 11, 2024 and sell it today you would lose (347.00) from holding Entech SE SAS or give up 37.03% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy99.8%
ValuesDaily Returns

Entech SE SAS  vs.  Forsee Power SAS

 Performance 
       Timeline  
Entech SE SAS 

Risk-Adjusted Performance

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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.
Forsee Power SAS 

Risk-Adjusted Performance

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Weak
 
Strong
Very Weak
Over the last 90 days Forsee Power SAS has generated negative risk-adjusted returns adding no value to investors with long positions. Even with weak performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in February 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Entech SE and Forsee Power Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Entech SE and Forsee Power

The main advantage of trading using opposite Entech SE and Forsee Power positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Entech SE position performs unexpectedly, Forsee Power 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 Forsee Power will offset losses from the drop in Forsee Power's long position.
The idea behind Entech SE SAS and Forsee Power SAS 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.

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