Correlation Between ED Invest and Stalprodukt

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

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

Diversification Opportunities for ED Invest and Stalprodukt

0.3

Correlation Coefficient

ED Invest  Stalprodukt

Weak diversification

The 3 months correlation between EDI and Stalprodukt is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding ED Invest SA and Stalprodukt SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stalprodukt SA and ED Invest 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 ED Invest SA are associated (or correlated) with Stalprodukt. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stalprodukt SA has no effect on the direction of ED Invest i.e., ED Invest and Stalprodukt go up and down completely randomly.

Pair Corralation between ED Invest and Stalprodukt

Assuming the 90 days trading horizon ED Invest is expected to generate 2.34 times less return on investment than Stalprodukt. But when comparing it to its historical volatility, ED Invest SA is 1.09 times less risky than Stalprodukt. It trades about 0.11 of its potential returns per unit of risk. Stalprodukt SA is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest  21,750  in Stalprodukt SA on December 23, 2024 and sell it today you would earn a total of  7,000  from holding Stalprodukt SA or generate 32.18% return on investment over 90 days.

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

ED Invest SA  vs.  Stalprodukt SA

ED Invest SA

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ED Invest SA are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, ED Invest reported solid returns over the last few months and may actually be approaching a breakup point.

Stalprodukt SA

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Stalprodukt SA are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Stalprodukt reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ED Invest and Stalprodukt

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

The idea behind ED Invest SA and Stalprodukt 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.

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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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.