Correlation Between ECSTELECOM and Cloud Air

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

By analyzing existing cross correlation between ECSTELECOM Co and Cloud Air CoLtd, you can compare the effects of market volatilities on ECSTELECOM and Cloud Air 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 ECSTELECOM with a short position of Cloud Air. Check out your portfolio center. Please also check ongoing floating volatility patterns of ECSTELECOM and Cloud Air.

Diversification Opportunities for ECSTELECOM and Cloud Air

0.38

Correlation Coefficient

ECSTELECOM  Cloud Air

Weak diversification

The 3 months correlation between ECSTELECOM and Cloud is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding ECSTELECOM Co and Cloud Air CoLtd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cloud Air CoLtd and ECSTELECOM 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 ECSTELECOM Co are associated (or correlated) with Cloud Air. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cloud Air CoLtd has no effect on the direction of ECSTELECOM i.e., ECSTELECOM and Cloud Air go up and down completely randomly.

Pair Corralation between ECSTELECOM and Cloud Air

Assuming the 90 days trading horizon ECSTELECOM Co is expected to generate 0.74 times more return on investment than Cloud Air. However, ECSTELECOM Co is 1.34 times less risky than Cloud Air. It trades about 0.12 of its potential returns per unit of risk. Cloud Air CoLtd is currently generating about 0.02 per unit of risk. If you would invest  294,500  in ECSTELECOM Co on September 25, 2024 and sell it today you would earn a total of  30,500  from holding ECSTELECOM Co or generate 10.36% return on investment over 90 days.

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

ECSTELECOM Co  vs.  Cloud Air CoLtd

ECSTELECOM

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ECSTELECOM Co are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, ECSTELECOM may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Cloud Air CoLtd

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Cloud Air CoLtd are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Cloud Air is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with ECSTELECOM and Cloud Air

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

The idea behind ECSTELECOM Co and Cloud Air CoLtd 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.