Correlation Between Motor Oil and Euroconsultants

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

By analyzing existing cross correlation between Motor Oil Corinth and Euroconsultants SA, you can compare the effects of market volatilities on Motor Oil and Euroconsultants 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 Motor Oil with a short position of Euroconsultants. Check out your portfolio center. Please also check ongoing floating volatility patterns of Motor Oil and Euroconsultants.

Diversification Opportunities for Motor Oil and Euroconsultants

0.81

Correlation Coefficient

Motor Oil  Euroconsultants

Very poor diversification

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

Pair Corralation between Motor Oil and Euroconsultants

Assuming the 90 days trading horizon Motor Oil is expected to generate 3.99 times less return on investment than Euroconsultants. But when comparing it to its historical volatility, Motor Oil Corinth is 1.12 times less risky than Euroconsultants. It trades about 0.01 of its potential returns per unit of risk. Euroconsultants SA is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  108.00  in Euroconsultants SA on September 14, 2024 and sell it today you would earn a total of  5.00  from holding Euroconsultants SA or generate 4.63% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	99.62%
Values	Daily Returns

Motor Oil Corinth  vs.  Euroconsultants SA

Motor Oil Corinth

Risk-Adjusted Performance

0 of 100

Very Weak

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

Euroconsultants SA

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Motor Oil and Euroconsultants

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

The idea behind Motor Oil Corinth and Euroconsultants SA 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.