Correlation Between Ecofin Global and Cairo Communication

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

By analyzing existing cross correlation between Ecofin Global Utilities and Cairo Communication SpA, you can compare the effects of market volatilities on Ecofin Global and Cairo Communication 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 Ecofin Global with a short position of Cairo Communication. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ecofin Global and Cairo Communication.

Diversification Opportunities for Ecofin Global and Cairo Communication

0.67

Correlation Coefficient

Ecofin Global  Cairo Communication

Poor diversification

The 3 months correlation between Ecofin and Cairo is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Ecofin Global Utilities and Cairo Communication SpA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cairo Communication SpA and Ecofin Global 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 Ecofin Global Utilities are associated (or correlated) with Cairo Communication. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cairo Communication SpA has no effect on the direction of Ecofin Global i.e., Ecofin Global and Cairo Communication go up and down completely randomly.

Pair Corralation between Ecofin Global and Cairo Communication

Assuming the 90 days trading horizon Ecofin Global is expected to generate 1.98 times less return on investment than Cairo Communication. But when comparing it to its historical volatility, Ecofin Global Utilities is 1.49 times less risky than Cairo Communication. It trades about 0.1 of its potential returns per unit of risk. Cairo Communication SpA is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  210.00  in Cairo Communication SpA on September 4, 2024 and sell it today you would earn a total of  24.00  from holding Cairo Communication SpA or generate 11.43% return on investment over 90 days.

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

Ecofin Global Utilities  vs.  Cairo Communication SpA

Ecofin Global Utilities

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Ecofin Global Utilities are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Ecofin Global is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Cairo Communication SpA

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Cairo Communication SpA are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Cairo Communication may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Ecofin Global and Cairo Communication

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

The idea behind Ecofin Global Utilities and Cairo Communication SpA 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 Stocks Directory module to find actively traded stocks across global markets.