Correlation Between EL D and Dromeas SA

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

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

Diversification Opportunities for EL D and Dromeas SA

-0.39

Correlation Coefficient

EL D  Dromeas SA

Very good diversification

The 3 months correlation between MOYZK and Dromeas is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding EL D Mouzakis and Dromeas SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dromeas SA and EL D 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 EL D Mouzakis are associated (or correlated) with Dromeas SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dromeas SA has no effect on the direction of EL D i.e., EL D and Dromeas SA go up and down completely randomly.

Pair Corralation between EL D and Dromeas SA

Assuming the 90 days trading horizon EL D is expected to generate 2.22 times less return on investment than Dromeas SA. But when comparing it to its historical volatility, EL D Mouzakis is 1.05 times less risky than Dromeas SA. It trades about 0.01 of its potential returns per unit of risk. Dromeas SA is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  30.00  in Dromeas SA on October 9, 2024 and sell it today you would earn a total of  3.00  from holding Dromeas SA or generate 10.0% return on investment over 90 days.

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

EL D Mouzakis  vs.  Dromeas SA

EL D Mouzakis

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days EL D Mouzakis has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, EL D is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Dromeas SA

Risk-Adjusted Performance

10 of 100

OK

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

Pair Trading with EL D and Dromeas SA

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

The idea behind EL D Mouzakis and Dromeas 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.

Check out your portfolio center.

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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.