Correlation Between Eco Wave and Ellomay Capital

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

By analyzing existing cross correlation between Eco Wave Power and Ellomay Capital, you can compare the effects of market volatilities on Eco Wave and Ellomay Capital 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 Eco Wave with a short position of Ellomay Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eco Wave and Ellomay Capital.

Diversification Opportunities for Eco Wave and Ellomay Capital

0.73

Correlation Coefficient

Eco Wave  Ellomay Capital

Poor diversification

The 3 months correlation between Eco and Ellomay is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Eco Wave Power and Ellomay Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ellomay Capital and Eco Wave 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 Eco Wave Power are associated (or correlated) with Ellomay Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ellomay Capital has no effect on the direction of Eco Wave i.e., Eco Wave and Ellomay Capital go up and down completely randomly.

Pair Corralation between Eco Wave and Ellomay Capital

Given the investment horizon of 90 days Eco Wave Power is expected to generate 3.57 times more return on investment than Ellomay Capital. However, Eco Wave is 3.57 times more volatile than Ellomay Capital. It trades about 0.18 of its potential returns per unit of risk. Ellomay Capital is currently generating about 0.15 per unit of risk. If you would invest  386.00  in Eco Wave Power on August 31, 2024 and sell it today you would earn a total of  596.00  from holding Eco Wave Power or generate 154.4% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	92.06%
Values	Daily Returns

Eco Wave Power  vs.  Ellomay Capital

Eco Wave Power

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Eco Wave Power are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile basic indicators, Eco Wave exhibited solid returns over the last few months and may actually be approaching a breakup point.

Ellomay Capital

Risk-Adjusted Performance

11 of 100

Good

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

Pair Trading with Eco Wave and Ellomay Capital

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

The idea behind Eco Wave Power and Ellomay Capital 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.