Correlation Between Echo Investment and True Games

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

Diversification Opportunities for Echo Investment and True Games

-0.52

Correlation Coefficient

Echo Investment  True Games

Excellent diversification

The 3 months correlation between Echo and True is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Echo Investment SA and True Games Syndicate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on True Games Syndicate 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 True Games. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of True Games Syndicate has no effect on the direction of Echo Investment i.e., Echo Investment and True Games go up and down completely randomly.

Pair Corralation between Echo Investment and True Games

Assuming the 90 days trading horizon Echo Investment SA is expected to under-perform the True Games. But the stock apears to be less risky and, when comparing its historical volatility, Echo Investment SA is 3.05 times less risky than True Games. The stock trades about -0.07 of its potential returns per unit of risk. The True Games Syndicate is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  44.00  in True Games Syndicate on December 29, 2024 and sell it today you would earn a total of  10.00  from holding True Games Syndicate or generate 22.73% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	83.87%
Values	Daily Returns

Echo Investment SA  vs.  True Games Syndicate

Echo Investment SA

Risk-Adjusted Performance

Very Weak

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

True Games Syndicate

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in True Games Syndicate are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, True Games reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Echo Investment and True Games

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

The idea behind Echo Investment SA and True Games Syndicate 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.