Correlation Between Atlantis and Echo Investment

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

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

Diversification Opportunities for Atlantis and Echo Investment

0.29

Correlation Coefficient

Atlantis  Echo Investment

Modest diversification

The 3 months correlation between Atlantis and Echo is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Atlantis SA and Echo Investment SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Echo Investment SA and Atlantis 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 Atlantis SA are associated (or correlated) with Echo Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Echo Investment SA has no effect on the direction of Atlantis i.e., Atlantis and Echo Investment go up and down completely randomly.

Pair Corralation between Atlantis and Echo Investment

Assuming the 90 days trading horizon Atlantis SA is expected to generate 4.23 times more return on investment than Echo Investment. However, Atlantis is 4.23 times more volatile than Echo Investment SA. It trades about 0.5 of its potential returns per unit of risk. Echo Investment SA is currently generating about -0.06 per unit of risk. If you would invest  15.00  in Atlantis SA on October 26, 2024 and sell it today you would earn a total of  9.00  from holding Atlantis SA or generate 60.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	94.44%
Values	Daily Returns

Atlantis SA  vs.  Echo Investment SA

Atlantis SA

Risk-Adjusted Performance

29 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Atlantis SA are ranked lower than 29 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Atlantis reported solid returns over the last few months and may actually be approaching a breakup point.

Echo Investment SA

Risk-Adjusted Performance

0 of 100

Very Weak

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

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

The idea behind Atlantis SA and Echo Investment 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.