Correlation Between CSL and ECHO INVESTMENT

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

By analyzing existing cross correlation between CSL LTD SPONADR and ECHO INVESTMENT ZY, you can compare the effects of market volatilities on CSL 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 CSL with a short position of ECHO INVESTMENT. Check out your portfolio center. Please also check ongoing floating volatility patterns of CSL and ECHO INVESTMENT.

Diversification Opportunities for CSL and ECHO INVESTMENT

-0.51

Correlation Coefficient

CSL  ECHO INVESTMENT

Excellent diversification

The 3 months correlation between CSL and ECHO is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding CSL LTD SPONADR and ECHO INVESTMENT ZY in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ECHO INVESTMENT ZY and CSL 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 CSL LTD SPONADR 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 ZY has no effect on the direction of CSL i.e., CSL and ECHO INVESTMENT go up and down completely randomly.

Pair Corralation between CSL and ECHO INVESTMENT

Assuming the 90 days trading horizon CSL LTD SPONADR is expected to under-perform the ECHO INVESTMENT. But the stock apears to be less risky and, when comparing its historical volatility, CSL LTD SPONADR is 1.39 times less risky than ECHO INVESTMENT. The stock trades about -0.01 of its potential returns per unit of risk. The ECHO INVESTMENT ZY is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  101.00  in ECHO INVESTMENT ZY on October 7, 2024 and sell it today you would earn a total of  8.00  from holding ECHO INVESTMENT ZY or generate 7.92% return on investment over 90 days.

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

CSL LTD SPONADR  vs.  ECHO INVESTMENT ZY

CSL LTD SPONADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CSL LTD SPONADR has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable forward-looking indicators, CSL is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

ECHO INVESTMENT ZY

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in ECHO INVESTMENT ZY are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, ECHO INVESTMENT may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with CSL and ECHO INVESTMENT

The main advantage of trading using opposite CSL and ECHO INVESTMENT positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CSL 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 CSL LTD SPONADR and ECHO INVESTMENT ZY 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.

Check out your portfolio center.

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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.