Correlation Between Encounter Technologi and Wellstar International

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

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

Diversification Opportunities for Encounter Technologi and Wellstar International

0.0

Correlation Coefficient

Encounter Technologi  Wellstar International

Pay attention - limited upside

The 3 months correlation between Encounter and Wellstar is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Encounter Technologi and Wellstar International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wellstar International and Encounter Technologi 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 Encounter Technologi are associated (or correlated) with Wellstar International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wellstar International has no effect on the direction of Encounter Technologi i.e., Encounter Technologi and Wellstar International go up and down completely randomly.

Pair Corralation between Encounter Technologi and Wellstar International

Given the investment horizon of 90 days Encounter Technologi is expected to generate 35.62 times more return on investment than Wellstar International. However, Encounter Technologi is 35.62 times more volatile than Wellstar International. It trades about 0.14 of its potential returns per unit of risk. Wellstar International is currently generating about -0.04 per unit of risk. If you would invest  0.01  in Encounter Technologi on September 29, 2024 and sell it today you would lose (0.01) from holding Encounter Technologi or give up 100.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	62.7%
Values	Daily Returns

Encounter Technologi  vs.  Wellstar International

Encounter Technologi

Risk-Adjusted Performance

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Very Weak

Over the last 90 days Encounter Technologi has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, Encounter Technologi is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Wellstar International

Risk-Adjusted Performance

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OK

Over the last 90 days Wellstar International has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, Wellstar International is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Encounter Technologi and Wellstar International

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

The idea behind Encounter Technologi and Wellstar International 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.