Correlation Between Echo Investment and GreenX Metals

Can any of the company-specific risk be diversified away by investing in both Echo Investment and GreenX Metals 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 GreenX Metals 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 GreenX Metals, you can compare the effects of market volatilities on Echo Investment and GreenX Metals 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 GreenX Metals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Echo Investment and GreenX Metals.

Diversification Opportunities for Echo Investment and GreenX Metals

-0.34

Correlation Coefficient

Echo Investment  GreenX Metals

Very good diversification

The 3 months correlation between Echo and GreenX is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Echo Investment SA and GreenX Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GreenX Metals 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 GreenX Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GreenX Metals has no effect on the direction of Echo Investment i.e., Echo Investment and GreenX Metals go up and down completely randomly.

Pair Corralation between Echo Investment and GreenX Metals

Assuming the 90 days trading horizon Echo Investment SA is expected to generate 1.63 times more return on investment than GreenX Metals. However, Echo Investment is 1.63 times more volatile than GreenX Metals. It trades about 0.18 of its potential returns per unit of risk. GreenX Metals is currently generating about 0.14 per unit of risk. If you would invest  445.00  in Echo Investment SA on October 9, 2024 and sell it today you would earn a total of  32.00  from holding Echo Investment SA or generate 7.19% return on investment over 90 days.

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

Echo Investment SA  vs.  GreenX Metals

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 February 2025.

GreenX Metals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days GreenX Metals has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, GreenX Metals is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Echo Investment and GreenX Metals

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

The idea behind Echo Investment SA and GreenX Metals 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .