Correlation Between IAR SA and Electroprecizia
Can any of the company-specific risk be diversified away by investing in both IAR SA and Electroprecizia 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 IAR SA and Electroprecizia into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between IAR SA and Electroprecizia SA, you can compare the effects of market volatilities on IAR SA and Electroprecizia 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 IAR SA with a short position of Electroprecizia. Check out your portfolio center. Please also check ongoing floating volatility patterns of IAR SA and Electroprecizia.
Diversification Opportunities for IAR SA and Electroprecizia
-0.32 | Correlation Coefficient |
Very good diversification
The 3 months correlation between IAR and Electroprecizia is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding IAR SA and Electroprecizia SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Electroprecizia SA and IAR SA 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 IAR SA are associated (or correlated) with Electroprecizia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Electroprecizia SA has no effect on the direction of IAR SA i.e., IAR SA and Electroprecizia go up and down completely randomly.
Pair Corralation between IAR SA and Electroprecizia
Assuming the 90 days trading horizon IAR SA is expected to under-perform the Electroprecizia. But the stock apears to be less risky and, when comparing its historical volatility, IAR SA is 1.38 times less risky than Electroprecizia. The stock trades about -0.07 of its potential returns per unit of risk. The Electroprecizia SA is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 1,380 in Electroprecizia SA on August 28, 2024 and sell it today you would earn a total of 20.00 from holding Electroprecizia SA or generate 1.45% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
IAR SA vs. Electroprecizia SA
Performance |
| Timeline |
| IAR SA |
| Electroprecizia SA |
IAR SA and Electroprecizia Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IAR SA and Electroprecizia
The main advantage of trading using opposite IAR SA and Electroprecizia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IAR SA position performs unexpectedly, Electroprecizia 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 Electroprecizia will offset losses from the drop in Electroprecizia's long position.The idea behind IAR SA and Electroprecizia 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 Stocks Directory module to find actively traded stocks across global markets.
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