Correlation Between Echo Investment and 4Mass SA
Can any of the company-specific risk be diversified away by investing in both Echo Investment and 4Mass 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 Echo Investment and 4Mass SA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Echo Investment SA and 4Mass SA, you can compare the effects of market volatilities on Echo Investment and 4Mass 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 Echo Investment with a short position of 4Mass SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Echo Investment and 4Mass SA.
Diversification Opportunities for Echo Investment and 4Mass SA
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Echo and 4Mass is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Echo Investment SA and 4Mass SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on 4Mass SA and Echo Investment 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 Echo Investment SA are associated (or correlated) with 4Mass SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of 4Mass SA has no effect on the direction of Echo Investment i.e., Echo Investment and 4Mass SA go up and down completely randomly.
Pair Corralation between Echo Investment and 4Mass SA
Assuming the 90 days trading horizon Echo Investment is expected to generate 3.48 times less return on investment than 4Mass SA. But when comparing it to its historical volatility, Echo Investment SA is 1.72 times less risky than 4Mass SA. It trades about 0.03 of its potential returns per unit of risk. 4Mass SA is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 420.00 in 4Mass SA on September 12, 2024 and sell it today you would earn a total of 236.00 from holding 4Mass SA or generate 56.19% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Echo Investment SA vs. 4Mass SA
Performance |
| Timeline |
| Echo Investment SA |
| 4Mass SA |
Echo Investment and 4Mass SA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Echo Investment and 4Mass SA
The main advantage of trading using opposite Echo Investment and 4Mass SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Echo Investment position performs unexpectedly, 4Mass 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 4Mass SA will offset losses from the drop in 4Mass SA's long position.| Echo Investment vs. Asseco Business Solutions | Echo Investment vs. Detalion Games SA | Echo Investment vs. Asseco South Eastern | Echo Investment vs. HM Inwest SA |
| 4Mass SA vs. Echo Investment SA | 4Mass SA vs. Creotech Instruments SA | 4Mass SA vs. Noble Financials SA | 4Mass SA vs. M Food SA |
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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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