Correlation Between Ellomay Capital and Azure Power

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

By analyzing existing cross correlation between Ellomay Capital and Azure Power Global, you can compare the effects of market volatilities on Ellomay Capital and Azure Power 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 Ellomay Capital with a short position of Azure Power. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ellomay Capital and Azure Power.

Diversification Opportunities for Ellomay Capital and Azure Power

-0.59

Correlation Coefficient

Ellomay Capital  Azure Power

Excellent diversification

The 3 months correlation between Ellomay and Azure is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding Ellomay Capital and Azure Power Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Azure Power Global and Ellomay 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 Ellomay Capital are associated (or correlated) with Azure Power. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Azure Power Global has no effect on the direction of Ellomay Capital i.e., Ellomay Capital and Azure Power go up and down completely randomly.

Pair Corralation between Ellomay Capital and Azure Power

Given the investment horizon of 90 days Ellomay Capital is expected to generate 0.36 times more return on investment than Azure Power. However, Ellomay Capital is 2.77 times less risky than Azure Power. It trades about 0.02 of its potential returns per unit of risk. Azure Power Global is currently generating about -0.13 per unit of risk. If you would invest  1,638  in Ellomay Capital on October 7, 2024 and sell it today you would earn a total of  22.00  from holding Ellomay Capital or generate 1.34% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	25.99%
Values	Daily Returns

Ellomay Capital  vs.  Azure Power Global

Ellomay Capital

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Ellomay Capital are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain essential indicators, Ellomay Capital displayed solid returns over the last few months and may actually be approaching a breakup point.

Azure Power Global

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Azure Power Global has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Azure Power is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Ellomay Capital and Azure Power

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

The idea behind Ellomay Capital and Azure Power Global 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.