Correlation Between Finebesteel and ECSTELECOM

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

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

Diversification Opportunities for Finebesteel and ECSTELECOM

0.13

Correlation Coefficient

Finebesteel  ECSTELECOM

Average diversification

The 3 months correlation between Finebesteel and ECSTELECOM is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Finebesteel and ECSTELECOM Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ECSTELECOM and Finebesteel 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 Finebesteel are associated (or correlated) with ECSTELECOM. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ECSTELECOM has no effect on the direction of Finebesteel i.e., Finebesteel and ECSTELECOM go up and down completely randomly.

Pair Corralation between Finebesteel and ECSTELECOM

Assuming the 90 days trading horizon Finebesteel is expected to generate 2.29 times more return on investment than ECSTELECOM. However, Finebesteel is 2.29 times more volatile than ECSTELECOM Co. It trades about 0.09 of its potential returns per unit of risk. ECSTELECOM Co is currently generating about -0.03 per unit of risk. If you would invest  91,000  in Finebesteel on September 2, 2024 and sell it today you would earn a total of  13,700  from holding Finebesteel or generate 15.05% return on investment over 90 days.

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

Finebesteel  vs.  ECSTELECOM Co

Finebesteel

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Finebesteel are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Finebesteel sustained solid returns over the last few months and may actually be approaching a breakup point.

ECSTELECOM

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ECSTELECOM Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, ECSTELECOM is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Finebesteel and ECSTELECOM

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

The idea behind Finebesteel and ECSTELECOM Co 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.