Correlation Between Ecofibre and Argo Investments

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

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

Diversification Opportunities for Ecofibre and Argo Investments

-0.3

Correlation Coefficient

Ecofibre  Argo Investments

Very good diversification

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

Pair Corralation between Ecofibre and Argo Investments

Assuming the 90 days trading horizon Ecofibre is expected to generate 14.27 times more return on investment than Argo Investments. However, Ecofibre is 14.27 times more volatile than Argo Investments. It trades about 0.04 of its potential returns per unit of risk. Argo Investments is currently generating about 0.12 per unit of risk. If you would invest  2.90  in Ecofibre on September 12, 2024 and sell it today you would earn a total of  0.10  from holding Ecofibre or generate 3.45% return on investment over 90 days.

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

Ecofibre  vs.  Argo Investments

Ecofibre

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Ecofibre are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak technical and fundamental indicators, Ecofibre unveiled solid returns over the last few months and may actually be approaching a breakup point.

Argo Investments

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Argo Investments are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable technical and fundamental indicators, Argo Investments is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Ecofibre and Argo Investments

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

The idea behind Ecofibre and Argo Investments 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.