Correlation Between Ecotel Communication and GMO Internet

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

By analyzing existing cross correlation between ecotel communication ag and GMO Internet, you can compare the effects of market volatilities on Ecotel Communication and GMO Internet 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 Ecotel Communication with a short position of GMO Internet. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ecotel Communication and GMO Internet.

Diversification Opportunities for Ecotel Communication and GMO Internet

-0.63

Correlation Coefficient

Ecotel Communication  GMO Internet

Excellent diversification

The 3 months correlation between Ecotel and GMO is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding ecotel communication ag and GMO Internet in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GMO Internet and Ecotel Communication 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 ecotel communication ag are associated (or correlated) with GMO Internet. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GMO Internet has no effect on the direction of Ecotel Communication i.e., Ecotel Communication and GMO Internet go up and down completely randomly.

Pair Corralation between Ecotel Communication and GMO Internet

Assuming the 90 days trading horizon ecotel communication ag is expected to under-perform the GMO Internet. But the stock apears to be less risky and, when comparing its historical volatility, ecotel communication ag is 1.23 times less risky than GMO Internet. The stock trades about -0.02 of its potential returns per unit of risk. The GMO Internet is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  1,594  in GMO Internet on December 21, 2024 and sell it today you would earn a total of  376.00  from holding GMO Internet or generate 23.59% return on investment over 90 days.

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

ecotel communication ag  vs.  GMO Internet

ecotel communication

Risk-Adjusted Performance

Very Weak

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

GMO Internet

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in GMO Internet are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, GMO Internet reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ecotel Communication and GMO Internet

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

The idea behind ecotel communication ag and GMO Internet 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.