Correlation Between Electro Ao and Inepar SA

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

By analyzing existing cross correlation between Electro Ao Altona and Inepar SA Indstria, you can compare the effects of market volatilities on Electro Ao and Inepar SA 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 Electro Ao with a short position of Inepar SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Electro Ao and Inepar SA.

Diversification Opportunities for Electro Ao and Inepar SA

0.5

Correlation Coefficient

Electro Ao  Inepar SA

Very weak diversification

The 3 months correlation between Electro and Inepar is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Electro Ao Altona and Inepar SA Indstria in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Inepar SA Indstria and Electro Ao 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 Electro Ao Altona are associated (or correlated) with Inepar SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Inepar SA Indstria has no effect on the direction of Electro Ao i.e., Electro Ao and Inepar SA go up and down completely randomly.

Pair Corralation between Electro Ao and Inepar SA

Assuming the 90 days trading horizon Electro Ao Altona is expected to generate 1.3 times more return on investment than Inepar SA. However, Electro Ao is 1.3 times more volatile than Inepar SA Indstria. It trades about 0.05 of its potential returns per unit of risk. Inepar SA Indstria is currently generating about -0.07 per unit of risk. If you would invest  867.00  in Electro Ao Altona on October 9, 2024 and sell it today you would earn a total of  533.00  from holding Electro Ao Altona or generate 61.48% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	78.43%
Values	Daily Returns

Electro Ao Altona  vs.  Inepar SA Indstria

Electro Ao Altona

Risk-Adjusted Performance

0 of 100

Very Weak

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

Inepar SA Indstria

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Inepar SA Indstria has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Electro Ao and Inepar SA

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

The idea behind Electro Ao Altona and Inepar SA Indstria 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.