Correlation Between ECN Capital and FP Newspapers

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Can any of the company-specific risk be diversified away by investing in both ECN Capital and FP Newspapers 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 ECN Capital and FP Newspapers into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ECN Capital Corp and FP Newspapers, you can compare the effects of market volatilities on ECN Capital and FP Newspapers 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 ECN Capital with a short position of FP Newspapers. Check out your portfolio center. Please also check ongoing floating volatility patterns of ECN Capital and FP Newspapers.

Diversification Opportunities for ECN Capital and FP Newspapers

-0.52
  Correlation Coefficient

Excellent diversification

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

Pair Corralation between ECN Capital and FP Newspapers

Assuming the 90 days trading horizon ECN Capital Corp is expected to generate 1.9 times more return on investment than FP Newspapers. However, ECN Capital is 1.9 times more volatile than FP Newspapers. It trades about 0.15 of its potential returns per unit of risk. FP Newspapers is currently generating about 0.04 per unit of risk. If you would invest  204.00  in ECN Capital Corp on September 12, 2024 and sell it today you would earn a total of  76.00  from holding ECN Capital Corp or generate 37.25% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

ECN Capital Corp  vs.  FP Newspapers

 Performance 
       Timeline  
ECN Capital Corp 

Risk-Adjusted Performance

11 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in ECN Capital Corp are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, ECN Capital displayed solid returns over the last few months and may actually be approaching a breakup point.
FP Newspapers 

Risk-Adjusted Performance

3 of 100

 
Weak
 
Strong
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in FP Newspapers are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, FP Newspapers is not utilizing all of its potentials. The recent stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

ECN Capital and FP Newspapers Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with ECN Capital and FP Newspapers

The main advantage of trading using opposite ECN Capital and FP Newspapers positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ECN Capital position performs unexpectedly, FP Newspapers 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 FP Newspapers will offset losses from the drop in FP Newspapers' long position.
The idea behind ECN Capital Corp and FP Newspapers 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.

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