Correlation Between Construction JSC and Elcom Technology

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

By analyzing existing cross correlation between Construction JSC No5 and Elcom Technology Communications, you can compare the effects of market volatilities on Construction JSC and Elcom Technology 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 Construction JSC with a short position of Elcom Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Construction JSC and Elcom Technology.

Diversification Opportunities for Construction JSC and Elcom Technology

0.71

Correlation Coefficient

Construction JSC  Elcom Technology

Poor diversification

The 3 months correlation between Construction and Elcom is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Construction JSC No5 and Elcom Technology Communication in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Elcom Technology Com and Construction JSC 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 Construction JSC No5 are associated (or correlated) with Elcom Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Elcom Technology Com has no effect on the direction of Construction JSC i.e., Construction JSC and Elcom Technology go up and down completely randomly.

Pair Corralation between Construction JSC and Elcom Technology

Assuming the 90 days trading horizon Construction JSC No5 is expected to under-perform the Elcom Technology. In addition to that, Construction JSC is 2.47 times more volatile than Elcom Technology Communications. It trades about -0.08 of its total potential returns per unit of risk. Elcom Technology Communications is currently generating about 0.14 per unit of volatility. If you would invest  2,580,000  in Elcom Technology Communications on September 17, 2024 and sell it today you would earn a total of  125,000  from holding Elcom Technology Communications or generate 4.84% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	57.14%
Values	Daily Returns

Construction JSC No5  vs.  Elcom Technology Communication

Construction JSC No5

Risk-Adjusted Performance

0 of 100

OK

Over the last 90 days Construction JSC No5 has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very unfluctuating basic indicators, Construction JSC displayed solid returns over the last few months and may actually be approaching a breakup point.

Elcom Technology Com

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Elcom Technology Communications are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating fundamental indicators, Elcom Technology displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Construction JSC and Elcom Technology

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

The idea behind Construction JSC No5 and Elcom Technology Communications 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 Global Correlations module to find global opportunities by holding instruments from different markets.