Correlation Between CFI Holding and ECC Games

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

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

Diversification Opportunities for CFI Holding and ECC Games

0.09

Correlation Coefficient

CFI Holding  ECC Games

Significant diversification

The 3 months correlation between CFI and ECC is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding CFI Holding SA and ECC Games SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ECC Games SA and CFI Holding 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 CFI Holding SA are associated (or correlated) with ECC Games. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ECC Games SA has no effect on the direction of CFI Holding i.e., CFI Holding and ECC Games go up and down completely randomly.

Pair Corralation between CFI Holding and ECC Games

Assuming the 90 days trading horizon CFI Holding SA is expected to under-perform the ECC Games. But the stock apears to be less risky and, when comparing its historical volatility, CFI Holding SA is 1.37 times less risky than ECC Games. The stock trades about 0.0 of its potential returns per unit of risk. The ECC Games SA is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  39.00  in ECC Games SA on December 28, 2024 and sell it today you would earn a total of  7.00  from holding ECC Games SA or generate 17.95% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	96.77%
Values	Daily Returns

CFI Holding SA  vs.  ECC Games SA

CFI Holding SA

Risk-Adjusted Performance

Very Weak

Over the last 90 days CFI Holding SA has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, CFI Holding is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

ECC Games SA

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in ECC Games SA are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, ECC Games reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CFI Holding and ECC Games

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

The idea behind CFI Holding SA and ECC Games 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.