Correlation Between Essentra Plc and ECHO INVESTMENT

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

By analyzing existing cross correlation between Essentra plc and ECHO INVESTMENT ZY, you can compare the effects of market volatilities on Essentra Plc and ECHO INVESTMENT 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 Essentra Plc with a short position of ECHO INVESTMENT. Check out your portfolio center. Please also check ongoing floating volatility patterns of Essentra Plc and ECHO INVESTMENT.

Diversification Opportunities for Essentra Plc and ECHO INVESTMENT

-0.56

Correlation Coefficient

Essentra Plc  ECHO INVESTMENT

Excellent diversification

The 3 months correlation between Essentra and ECHO is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding Essentra plc and ECHO INVESTMENT ZY in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ECHO INVESTMENT ZY and Essentra Plc 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 Essentra plc are associated (or correlated) with ECHO INVESTMENT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ECHO INVESTMENT ZY has no effect on the direction of Essentra Plc i.e., Essentra Plc and ECHO INVESTMENT go up and down completely randomly.

Pair Corralation between Essentra Plc and ECHO INVESTMENT

Assuming the 90 days horizon Essentra plc is expected to under-perform the ECHO INVESTMENT. But the stock apears to be less risky and, when comparing its historical volatility, Essentra plc is 1.1 times less risky than ECHO INVESTMENT. The stock trades about -0.26 of its potential returns per unit of risk. The ECHO INVESTMENT ZY is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  105.00  in ECHO INVESTMENT ZY on October 11, 2024 and sell it today you would earn a total of  4.00  from holding ECHO INVESTMENT ZY or generate 3.81% return on investment over 90 days.

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

Essentra plc  vs.  ECHO INVESTMENT ZY

Essentra plc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Essentra plc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

ECHO INVESTMENT ZY

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ECHO INVESTMENT ZY are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, ECHO INVESTMENT reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Essentra Plc and ECHO INVESTMENT

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

The idea behind Essentra plc and ECHO INVESTMENT ZY 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.