Correlation Between Europlasma and I2S SA
Can any of the company-specific risk be diversified away by investing in both Europlasma and I2S 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 Europlasma and I2S SA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Europlasma SA and i2S SA, you can compare the effects of market volatilities on Europlasma and I2S 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 Europlasma with a short position of I2S SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Europlasma and I2S SA.
Diversification Opportunities for Europlasma and I2S SA
-0.38 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Europlasma and I2S is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Europlasma SA and i2S SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on i2S SA and Europlasma 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 Europlasma SA are associated (or correlated) with I2S SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of i2S SA has no effect on the direction of Europlasma i.e., Europlasma and I2S SA go up and down completely randomly.
Pair Corralation between Europlasma and I2S SA
Assuming the 90 days trading horizon Europlasma SA is expected to generate 5.54 times more return on investment than I2S SA. However, Europlasma is 5.54 times more volatile than i2S SA. It trades about 0.18 of its potential returns per unit of risk. i2S SA is currently generating about 0.05 per unit of risk. If you would invest 6.81 in Europlasma SA on August 31, 2024 and sell it today you would earn a total of 5.19 from holding Europlasma SA or generate 76.21% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.65% |
| Values | Daily Returns |
Europlasma SA vs. i2S SA
Performance |
| Timeline |
| Europlasma SA |
| i2S SA |
Europlasma and I2S SA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Europlasma and I2S SA
The main advantage of trading using opposite Europlasma and I2S SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Europlasma position performs unexpectedly, I2S 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 I2S SA will offset losses from the drop in I2S SA's long position.The idea behind Europlasma SA and i2S 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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