Correlation Between Ecofibre and Platinum Asia

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

By analyzing existing cross correlation between Ecofibre and Platinum Asia, you can compare the effects of market volatilities on Ecofibre and Platinum Asia 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 Platinum Asia. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ecofibre and Platinum Asia.

Diversification Opportunities for Ecofibre and Platinum Asia

-0.01

Correlation Coefficient

Ecofibre  Platinum Asia

Good diversification

The 3 months correlation between Ecofibre and Platinum is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding Ecofibre and Platinum Asia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Platinum Asia 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 Platinum Asia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Platinum Asia has no effect on the direction of Ecofibre i.e., Ecofibre and Platinum Asia go up and down completely randomly.

Pair Corralation between Ecofibre and Platinum Asia

Assuming the 90 days trading horizon Ecofibre is expected to generate 8.41 times more return on investment than Platinum Asia. However, Ecofibre is 8.41 times more volatile than Platinum Asia. It trades about 0.08 of its potential returns per unit of risk. Platinum Asia is currently generating about -0.25 per unit of risk. If you would invest  3.00  in Ecofibre on October 11, 2024 and sell it today you would earn a total of  0.20  from holding Ecofibre or generate 6.67% return on investment over 90 days.

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

Ecofibre  vs.  Platinum Asia

Ecofibre

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ecofibre has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's technical and fundamental indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Platinum Asia

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Platinum Asia has generated negative risk-adjusted returns adding no value to fund investors. In spite of comparatively stable basic indicators, Platinum Asia 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 Platinum Asia

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

The idea behind Ecofibre and Platinum Asia 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.