Correlation Between Europlasma and Archos

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

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

Diversification Opportunities for Europlasma and Archos

0.38

Correlation Coefficient

Europlasma  Archos

Weak diversification

The 3 months correlation between Europlasma and Archos is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Europlasma SA and Archos in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Archos and Europlasma 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 Europlasma SA are associated (or correlated) with Archos. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Archos has no effect on the direction of Europlasma i.e., Europlasma and Archos go up and down completely randomly.

Pair Corralation between Europlasma and Archos

Assuming the 90 days trading horizon Europlasma SA is expected to generate 5.95 times more return on investment than Archos. However, Europlasma is 5.95 times more volatile than Archos. It trades about 0.01 of its potential returns per unit of risk. Archos is currently generating about -0.02 per unit of risk. If you would invest  17.00  in Europlasma SA on September 4, 2024 and sell it today you would lose (9.35) from holding Europlasma SA or give up 55.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.46%
Values	Daily Returns

Europlasma SA  vs.  Archos

Europlasma SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Europlasma SA has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively weak basic indicators, Europlasma may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Archos

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Archos has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Archos 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 Europlasma and Archos

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

The idea behind Europlasma SA and Archos 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.