Correlation Between Electromagnetica and TRANSILVANIA LEASING

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

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

Diversification Opportunities for Electromagnetica and TRANSILVANIA LEASING

0.23

Correlation Coefficient

Electromagnetica  TRANSILVANIA LEASING

Modest diversification

The 3 months correlation between Electromagnetica and TRANSILVANIA is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Electromagnetica SA and TRANSILVANIA LEASING SI in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TRANSILVANIA LEASING and Electromagnetica 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 Electromagnetica SA are associated (or correlated) with TRANSILVANIA LEASING. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TRANSILVANIA LEASING has no effect on the direction of Electromagnetica i.e., Electromagnetica and TRANSILVANIA LEASING go up and down completely randomly.

Pair Corralation between Electromagnetica and TRANSILVANIA LEASING

Assuming the 90 days trading horizon Electromagnetica SA is expected to generate 0.5 times more return on investment than TRANSILVANIA LEASING. However, Electromagnetica SA is 2.0 times less risky than TRANSILVANIA LEASING. It trades about 0.13 of its potential returns per unit of risk. TRANSILVANIA LEASING SI is currently generating about 0.05 per unit of risk. If you would invest  20.00  in Electromagnetica SA on September 26, 2024 and sell it today you would earn a total of  1.00  from holding Electromagnetica SA or generate 5.0% return on investment over 90 days.

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

Electromagnetica SA  vs.  TRANSILVANIA LEASING SI

Electromagnetica

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Electromagnetica SA are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Electromagnetica may actually be approaching a critical reversion point that can send shares even higher in January 2025.

TRANSILVANIA LEASING

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days TRANSILVANIA LEASING SI 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 Electromagnetica and TRANSILVANIA LEASING

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

The idea behind Electromagnetica SA and TRANSILVANIA LEASING SI 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.