Correlation Between Echo Investment and Notoria

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

Diversification Opportunities for Echo Investment and Notoria

0.82

Correlation Coefficient

Echo Investment  Notoria

Very poor diversification

The 3 months correlation between Echo and Notoria is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Echo Investment SA and Notoria in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Notoria 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 Notoria. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Notoria has no effect on the direction of Echo Investment i.e., Echo Investment and Notoria go up and down completely randomly.

Pair Corralation between Echo Investment and Notoria

Assuming the 90 days trading horizon Echo Investment is expected to generate 1.73 times less return on investment than Notoria. But when comparing it to its historical volatility, Echo Investment SA is 2.53 times less risky than Notoria. It trades about 0.06 of its potential returns per unit of risk. Notoria is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  658.00  in Notoria on September 2, 2024 and sell it today you would earn a total of  157.00  from holding Notoria or generate 23.86% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	46.37%
Values	Daily Returns

Echo Investment SA  vs.  Notoria

Echo Investment SA

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Echo Investment SA are ranked lower than 4 (%) 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 January 2025.

Notoria

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Notoria are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Notoria reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Echo Investment and Notoria

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

The idea behind Echo Investment SA and Notoria 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.