Correlation Between Electro Ao and Fras Le

Can any of the company-specific risk be diversified away by investing in both Electro Ao and Fras Le 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 Fras Le 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 Fras le SA, you can compare the effects of market volatilities on Electro Ao and Fras Le 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 Fras Le. Check out your portfolio center. Please also check ongoing floating volatility patterns of Electro Ao and Fras Le.

Diversification Opportunities for Electro Ao and Fras Le

0.06

Correlation Coefficient

Electro Ao  Fras Le

Significant diversification

The 3 months correlation between Electro and Fras is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Electro Ao Altona and Fras le SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fras le SA 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 Fras Le. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fras le SA has no effect on the direction of Electro Ao i.e., Electro Ao and Fras Le go up and down completely randomly.

Pair Corralation between Electro Ao and Fras Le

Assuming the 90 days trading horizon Electro Ao Altona is expected to under-perform the Fras Le. But the preferred stock apears to be less risky and, when comparing its historical volatility, Electro Ao Altona is 1.88 times less risky than Fras Le. The preferred stock trades about -0.34 of its potential returns per unit of risk. The Fras le SA is currently generating about 0.36 of returns per unit of risk over similar time horizon. If you would invest  2,179  in Fras le SA on December 4, 2024 and sell it today you would earn a total of  198.00  from holding Fras le SA or generate 9.09% return on investment over 90 days.

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

Electro Ao Altona  vs.  Fras le SA

Electro Ao Altona

Risk-Adjusted Performance

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 current stock price uproar, may contribute to short-horizon losses for the private investors.

Fras le SA

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Fras le SA are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Fras Le unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Electro Ao and Fras Le

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

The idea behind Electro Ao Altona and Fras le 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.

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 Transaction History module to view history of all your transactions and understand their impact on performance.