Correlation Between ECN Capital and S A P

Can any of the company-specific risk be diversified away by investing in both ECN Capital and S A P 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 S A P 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 Saputo Inc, you can compare the effects of market volatilities on ECN Capital and S A P 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 S A P. Check out your portfolio center. Please also check ongoing floating volatility patterns of ECN Capital and S A P.

Diversification Opportunities for ECN Capital and S A P

-0.81

Correlation Coefficient

ECN Capital  S A P

Pay attention - limited upside

The 3 months correlation between ECN and SAP is -0.81. Overlapping area represents the amount of risk that can be diversified away by holding ECN Capital Corp and Saputo Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Saputo Inc 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 S A P. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Saputo Inc has no effect on the direction of ECN Capital i.e., ECN Capital and S A P go up and down completely randomly.

Pair Corralation between ECN Capital and S A P

Assuming the 90 days trading horizon ECN Capital Corp is expected to generate 4.05 times more return on investment than S A P. However, ECN Capital is 4.05 times more volatile than Saputo Inc. It trades about 0.13 of its potential returns per unit of risk. Saputo Inc is currently generating about -0.19 per unit of risk. If you would invest  212.00  in ECN Capital Corp on September 3, 2024 and sell it today you would earn a total of  69.00  from holding ECN Capital Corp or generate 32.55% return on investment over 90 days.

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

ECN Capital Corp  vs.  Saputo Inc

ECN Capital Corp

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ECN Capital Corp are ranked lower than 10 (%) 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.

Saputo Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Saputo Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with ECN Capital and S A P

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

The idea behind ECN Capital Corp and Saputo Inc 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.