Correlation Between Impax Environmental and Cairo Communication

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

By analyzing existing cross correlation between Impax Environmental Markets and Cairo Communication SpA, you can compare the effects of market volatilities on Impax Environmental and Cairo Communication 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 Impax Environmental with a short position of Cairo Communication. Check out your portfolio center. Please also check ongoing floating volatility patterns of Impax Environmental and Cairo Communication.

Diversification Opportunities for Impax Environmental and Cairo Communication

-0.69

Correlation Coefficient

Impax Environmental  Cairo Communication

Excellent diversification

The 3 months correlation between Impax and Cairo is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding Impax Environmental Markets and Cairo Communication SpA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cairo Communication SpA and Impax Environmental 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 Impax Environmental Markets are associated (or correlated) with Cairo Communication. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cairo Communication SpA has no effect on the direction of Impax Environmental i.e., Impax Environmental and Cairo Communication go up and down completely randomly.

Pair Corralation between Impax Environmental and Cairo Communication

Assuming the 90 days trading horizon Impax Environmental Markets is expected to under-perform the Cairo Communication. But the stock apears to be less risky and, when comparing its historical volatility, Impax Environmental Markets is 1.29 times less risky than Cairo Communication. The stock trades about -0.1 of its potential returns per unit of risk. The Cairo Communication SpA is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  242.00  in Cairo Communication SpA on December 30, 2024 and sell it today you would earn a total of  44.00  from holding Cairo Communication SpA or generate 18.18% return on investment over 90 days.

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

Impax Environmental Markets  vs.  Cairo Communication SpA

Impax Environmental

Risk-Adjusted Performance

Very Weak

Over the last 90 days Impax Environmental Markets has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Impax Environmental is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Cairo Communication SpA

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Cairo Communication SpA are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Cairo Communication unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Impax Environmental and Cairo Communication

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

The idea behind Impax Environmental Markets and Cairo Communication SpA 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.