Correlation Between Eclat Textile and Gourmet Master

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

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

Diversification Opportunities for Eclat Textile and Gourmet Master

0.39

Correlation Coefficient

Eclat Textile  Gourmet Master

Weak diversification

The 3 months correlation between Eclat and Gourmet is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Eclat Textile Co and Gourmet Master Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gourmet Master and Eclat Textile 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 Eclat Textile Co are associated (or correlated) with Gourmet Master. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gourmet Master has no effect on the direction of Eclat Textile i.e., Eclat Textile and Gourmet Master go up and down completely randomly.

Pair Corralation between Eclat Textile and Gourmet Master

Assuming the 90 days trading horizon Eclat Textile Co is expected to under-perform the Gourmet Master. In addition to that, Eclat Textile is 1.62 times more volatile than Gourmet Master Co. It trades about -0.03 of its total potential returns per unit of risk. Gourmet Master Co is currently generating about 0.25 per unit of volatility. If you would invest  8,850  in Gourmet Master Co on September 1, 2024 and sell it today you would earn a total of  720.00  from holding Gourmet Master Co or generate 8.14% return on investment over 90 days.

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

Eclat Textile Co  vs.  Gourmet Master Co

Eclat Textile

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Eclat Textile Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Eclat Textile is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Gourmet Master

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Gourmet Master Co are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Gourmet Master showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Eclat Textile and Gourmet Master

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

The idea behind Eclat Textile Co and Gourmet Master 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.