Correlation Between Fras Le and Electro Ao

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

By analyzing existing cross correlation between Fras le SA and Electro Ao Altona, you can compare the effects of market volatilities on Fras Le and Electro Ao 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 Fras Le with a short position of Electro Ao. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fras Le and Electro Ao.

Diversification Opportunities for Fras Le and Electro Ao

-0.57

Correlation Coefficient

Fras Le  Electro Ao

Excellent diversification

The 3 months correlation between Fras and Electro is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding Fras le SA and Electro Ao Altona in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Electro Ao Altona and Fras Le 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 Fras le SA are associated (or correlated) with Electro Ao. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Electro Ao Altona has no effect on the direction of Fras Le i.e., Fras Le and Electro Ao go up and down completely randomly.

Pair Corralation between Fras Le and Electro Ao

Assuming the 90 days trading horizon Fras le SA is expected to generate 0.62 times more return on investment than Electro Ao. However, Fras le SA is 1.62 times less risky than Electro Ao. It trades about 0.04 of its potential returns per unit of risk. Electro Ao Altona is currently generating about -0.04 per unit of risk. If you would invest  2,065  in Fras le SA on September 15, 2024 and sell it today you would earn a total of  63.00  from holding Fras le SA or generate 3.05% return on investment over 90 days.

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

Fras le SA  vs.  Electro Ao Altona

Fras le SA

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Fras le SA are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Fras Le is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Electro Ao Altona

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Electro Ao Altona has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Electro Ao is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Fras Le and Electro Ao

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

The idea behind Fras le SA and Electro Ao Altona 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 Global Correlations module to find global opportunities by holding instruments from different markets.