Correlation Between CHAMPION BREWERIES and ECOBANK TRANSNATIONAL

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

By analyzing existing cross correlation between CHAMPION BREWERIES PLC and ECOBANK TRANSNATIONAL INCORPORATED, you can compare the effects of market volatilities on CHAMPION BREWERIES and ECOBANK TRANSNATIONAL 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 CHAMPION BREWERIES with a short position of ECOBANK TRANSNATIONAL. Check out your portfolio center. Please also check ongoing floating volatility patterns of CHAMPION BREWERIES and ECOBANK TRANSNATIONAL.

Diversification Opportunities for CHAMPION BREWERIES and ECOBANK TRANSNATIONAL

0.76

Correlation Coefficient

CHAMPION BREWERIES  ECOBANK TRANSNATIONAL

Poor diversification

The 3 months correlation between CHAMPION and ECOBANK is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding CHAMPION BREWERIES PLC and ECOBANK TRANSNATIONAL INCORPOR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ECOBANK TRANSNATIONAL and CHAMPION BREWERIES 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 CHAMPION BREWERIES PLC are associated (or correlated) with ECOBANK TRANSNATIONAL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ECOBANK TRANSNATIONAL has no effect on the direction of CHAMPION BREWERIES i.e., CHAMPION BREWERIES and ECOBANK TRANSNATIONAL go up and down completely randomly.

Pair Corralation between CHAMPION BREWERIES and ECOBANK TRANSNATIONAL

Assuming the 90 days trading horizon CHAMPION BREWERIES PLC is expected to under-perform the ECOBANK TRANSNATIONAL. In addition to that, CHAMPION BREWERIES is 2.02 times more volatile than ECOBANK TRANSNATIONAL INCORPORATED. It trades about -0.06 of its total potential returns per unit of risk. ECOBANK TRANSNATIONAL INCORPORATED is currently generating about 0.24 per unit of volatility. If you would invest  2,800  in ECOBANK TRANSNATIONAL INCORPORATED on October 23, 2024 and sell it today you would earn a total of  240.00  from holding ECOBANK TRANSNATIONAL INCORPORATED or generate 8.57% return on investment over 90 days.

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

CHAMPION BREWERIES PLC  vs.  ECOBANK TRANSNATIONAL INCORPOR

CHAMPION BREWERIES PLC

Risk-Adjusted Performance

3 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in CHAMPION BREWERIES PLC are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, CHAMPION BREWERIES may actually be approaching a critical reversion point that can send shares even higher in February 2025.

ECOBANK TRANSNATIONAL

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in ECOBANK TRANSNATIONAL INCORPORATED are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, ECOBANK TRANSNATIONAL unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CHAMPION BREWERIES and ECOBANK TRANSNATIONAL

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

The idea behind CHAMPION BREWERIES PLC and ECOBANK TRANSNATIONAL INCORPORATED 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.