Correlation Between Echo Investment and Baked Games

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

By analyzing existing cross correlation between Echo Investment SA and Baked Games SA, you can compare the effects of market volatilities on Echo Investment and Baked Games 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 Echo Investment with a short position of Baked Games. Check out your portfolio center. Please also check ongoing floating volatility patterns of Echo Investment and Baked Games.

Diversification Opportunities for Echo Investment and Baked Games

-0.77

Correlation Coefficient

Echo Investment  Baked Games

Pay attention - limited upside

The 3 months correlation between Echo and Baked is -0.77. Overlapping area represents the amount of risk that can be diversified away by holding Echo Investment SA and Baked Games SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Baked Games SA and Echo Investment 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 Echo Investment SA are associated (or correlated) with Baked Games. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Baked Games SA has no effect on the direction of Echo Investment i.e., Echo Investment and Baked Games go up and down completely randomly.

Pair Corralation between Echo Investment and Baked Games

Assuming the 90 days trading horizon Echo Investment SA is expected to generate 0.38 times more return on investment than Baked Games. However, Echo Investment SA is 2.6 times less risky than Baked Games. It trades about 0.08 of its potential returns per unit of risk. Baked Games SA is currently generating about -0.1 per unit of risk. If you would invest  410.00  in Echo Investment SA on August 31, 2024 and sell it today you would earn a total of  36.00  from holding Echo Investment SA or generate 8.78% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	95.16%
Values	Daily Returns

Echo Investment SA  vs.  Baked Games SA

Echo Investment SA

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Echo Investment SA are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Echo Investment may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Baked Games SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Baked Games SA has generated negative risk-adjusted returns adding no value to investors with long positions. Even with weak performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in December 2024. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with Echo Investment and Baked Games

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

The idea behind Echo Investment SA and Baked Games 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.

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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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.