Correlation Between Balkan Mining and Emeco Holdings

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

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

Diversification Opportunities for Balkan Mining and Emeco Holdings

-0.36

Correlation Coefficient

Balkan Mining  Emeco Holdings

Very good diversification

The 3 months correlation between Balkan and Emeco is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Balkan Mining and and Emeco Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Emeco Holdings and Balkan Mining 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 Balkan Mining and are associated (or correlated) with Emeco Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Emeco Holdings has no effect on the direction of Balkan Mining i.e., Balkan Mining and Emeco Holdings go up and down completely randomly.

Pair Corralation between Balkan Mining and Emeco Holdings

Assuming the 90 days trading horizon Balkan Mining and is expected to generate 1.79 times more return on investment than Emeco Holdings. However, Balkan Mining is 1.79 times more volatile than Emeco Holdings. It trades about 0.0 of its potential returns per unit of risk. Emeco Holdings is currently generating about -0.03 per unit of risk. If you would invest  4.90  in Balkan Mining and on December 21, 2024 and sell it today you would lose (0.20) from holding Balkan Mining and or give up 4.08% of portfolio value over 90 days.

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

Balkan Mining and  vs.  Emeco Holdings

Balkan Mining

Risk-Adjusted Performance

Very Weak

Over the last 90 days Balkan Mining and has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable primary indicators, Balkan Mining is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Emeco Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days Emeco Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable essential indicators, Emeco Holdings is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Balkan Mining and Emeco Holdings

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

The idea behind Balkan Mining and and Emeco Holdings 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.