Correlation Between Prodways Group and Innelec Multimedia

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

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

Diversification Opportunities for Prodways Group and Innelec Multimedia

0.7

Correlation Coefficient

Prodways Group  Innelec Multimedia

Poor diversification

The 3 months correlation between Prodways and Innelec is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Prodways Group SA and Innelec Multimedia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Innelec Multimedia and Prodways Group 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 Prodways Group SA are associated (or correlated) with Innelec Multimedia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Innelec Multimedia has no effect on the direction of Prodways Group i.e., Prodways Group and Innelec Multimedia go up and down completely randomly.

Pair Corralation between Prodways Group and Innelec Multimedia

Assuming the 90 days trading horizon Prodways Group SA is expected to under-perform the Innelec Multimedia. But the stock apears to be less risky and, when comparing its historical volatility, Prodways Group SA is 1.17 times less risky than Innelec Multimedia. The stock trades about -0.07 of its potential returns per unit of risk. The Innelec Multimedia is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  646.00  in Innelec Multimedia on October 5, 2024 and sell it today you would lose (289.00) from holding Innelec Multimedia or give up 44.74% of portfolio value over 90 days.

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

Prodways Group SA  vs.  Innelec Multimedia

Prodways Group SA

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Prodways Group SA are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak technical and fundamental indicators, Prodways Group sustained solid returns over the last few months and may actually be approaching a breakup point.

Innelec Multimedia

Risk-Adjusted Performance

1 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Innelec Multimedia are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, Innelec Multimedia is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Prodways Group and Innelec Multimedia

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

The idea behind Prodways Group SA and Innelec Multimedia 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.