Correlation Between ECOBANK TRANSNATIONAL and CONOIL PLC

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

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

Diversification Opportunities for ECOBANK TRANSNATIONAL and CONOIL PLC

0.81

Correlation Coefficient

ECOBANK TRANSNATIONAL  CONOIL PLC

Very poor diversification

The 3 months correlation between ECOBANK and CONOIL is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding ECOBANK TRANSNATIONAL INCORPOR and CONOIL PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CONOIL PLC and ECOBANK TRANSNATIONAL 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 ECOBANK TRANSNATIONAL INCORPORATED are associated (or correlated) with CONOIL PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CONOIL PLC has no effect on the direction of ECOBANK TRANSNATIONAL i.e., ECOBANK TRANSNATIONAL and CONOIL PLC go up and down completely randomly.

Pair Corralation between ECOBANK TRANSNATIONAL and CONOIL PLC

Assuming the 90 days trading horizon ECOBANK TRANSNATIONAL is expected to generate 7.1 times less return on investment than CONOIL PLC. But when comparing it to its historical volatility, ECOBANK TRANSNATIONAL INCORPORATED is 2.73 times less risky than CONOIL PLC. It trades about 0.22 of its potential returns per unit of risk. CONOIL PLC is currently generating about 0.57 of returns per unit of risk over similar time horizon. If you would invest  25,900  in CONOIL PLC on September 17, 2024 and sell it today you would earn a total of  12,820  from holding CONOIL PLC or generate 49.5% return on investment over 90 days.

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

ECOBANK TRANSNATIONAL INCORPOR  vs.  CONOIL PLC

ECOBANK TRANSNATIONAL

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in ECOBANK TRANSNATIONAL INCORPORATED are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, ECOBANK TRANSNATIONAL may actually be approaching a critical reversion point that can send shares even higher in January 2025.

CONOIL PLC

Risk-Adjusted Performance

31 of 100

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in CONOIL PLC are ranked lower than 31 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating forward indicators, CONOIL PLC sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ECOBANK TRANSNATIONAL and CONOIL PLC

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

The idea behind ECOBANK TRANSNATIONAL INCORPORATED and CONOIL PLC 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.