Correlation Between Eco Wave and Exro Technologies

Can any of the company-specific risk be diversified away by investing in both Eco Wave and Exro Technologies 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 Exro Technologies 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 Exro Technologies, you can compare the effects of market volatilities on Eco Wave and Exro Technologies 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 Exro Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eco Wave and Exro Technologies.

Diversification Opportunities for Eco Wave and Exro Technologies

0.65

Correlation Coefficient

Eco Wave  Exro Technologies

Poor diversification

The 3 months correlation between Eco and Exro is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Eco Wave Power and Exro Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Exro Technologies 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 Exro Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Exro Technologies has no effect on the direction of Eco Wave i.e., Eco Wave and Exro Technologies go up and down completely randomly.

Pair Corralation between Eco Wave and Exro Technologies

Given the investment horizon of 90 days Eco Wave Power is expected to under-perform the Exro Technologies. But the stock apears to be less risky and, when comparing its historical volatility, Eco Wave Power is 1.05 times less risky than Exro Technologies. The stock trades about -0.14 of its potential returns per unit of risk. The Exro Technologies is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  8.80  in Exro Technologies on December 27, 2024 and sell it today you would lose (1.40) from holding Exro Technologies or give up 15.91% of portfolio value over 90 days.

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

Eco Wave Power  vs.  Exro Technologies

Eco Wave Power

Risk-Adjusted Performance

Very Weak

Over the last 90 days Eco Wave Power has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Exro Technologies

Risk-Adjusted Performance

Very Weak

Over the last 90 days Exro Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Exro Technologies is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Eco Wave and Exro Technologies

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

The idea behind Eco Wave Power and Exro Technologies 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.