Correlation Between GRUPUL INDUSTRIAL and Electromagnetica

Can any of the company-specific risk be diversified away by investing in both GRUPUL INDUSTRIAL and Electromagnetica 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 GRUPUL INDUSTRIAL and Electromagnetica into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between GRUPUL INDUSTRIAL ELECTROCONTACT and Electromagnetica SA, you can compare the effects of market volatilities on GRUPUL INDUSTRIAL and Electromagnetica 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 GRUPUL INDUSTRIAL with a short position of Electromagnetica. Check out your portfolio center. Please also check ongoing floating volatility patterns of GRUPUL INDUSTRIAL and Electromagnetica.

Diversification Opportunities for GRUPUL INDUSTRIAL and Electromagnetica

-0.5

Correlation Coefficient

GRUPUL INDUSTRIAL  Electromagnetica

Very good diversification

The 3 months correlation between GRUPUL and Electromagnetica is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding GRUPUL INDUSTRIAL ELECTROCONTA and Electromagnetica SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Electromagnetica and GRUPUL INDUSTRIAL 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 GRUPUL INDUSTRIAL ELECTROCONTACT are associated (or correlated) with Electromagnetica. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Electromagnetica has no effect on the direction of GRUPUL INDUSTRIAL i.e., GRUPUL INDUSTRIAL and Electromagnetica go up and down completely randomly.

Pair Corralation between GRUPUL INDUSTRIAL and Electromagnetica

Assuming the 90 days trading horizon GRUPUL INDUSTRIAL ELECTROCONTACT is expected to under-perform the Electromagnetica. But the stock apears to be less risky and, when comparing its historical volatility, GRUPUL INDUSTRIAL ELECTROCONTACT is 13.08 times less risky than Electromagnetica. The stock trades about -0.26 of its potential returns per unit of risk. The Electromagnetica SA is currently generating about 0.42 of returns per unit of risk over similar time horizon. If you would invest  20.00  in Electromagnetica SA on October 9, 2024 and sell it today you would earn a total of  5.00  from holding Electromagnetica SA or generate 25.0% return on investment over 90 days.

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

GRUPUL INDUSTRIAL ELECTROCONTA  vs.  Electromagnetica SA

GRUPUL INDUSTRIAL

Risk-Adjusted Performance

0 of 100

OK

Over the last 90 days GRUPUL INDUSTRIAL ELECTROCONTACT has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very unfluctuating basic indicators, GRUPUL INDUSTRIAL may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Electromagnetica

Risk-Adjusted Performance

0 of 100

OK

Over the last 90 days Electromagnetica SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very weak basic indicators, Electromagnetica displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with GRUPUL INDUSTRIAL and Electromagnetica

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

The idea behind GRUPUL INDUSTRIAL ELECTROCONTACT and Electromagnetica SA 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 Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.