Correlation Between Electro Ao and Marcopolo

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

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

Diversification Opportunities for Electro Ao and Marcopolo

0.26

Correlation Coefficient

Electro Ao  Marcopolo

Modest diversification

The 3 months correlation between Electro and Marcopolo is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Electro Ao Altona and Marcopolo SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Marcopolo SA and Electro Ao 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 Electro Ao Altona are associated (or correlated) with Marcopolo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Marcopolo SA has no effect on the direction of Electro Ao i.e., Electro Ao and Marcopolo go up and down completely randomly.

Pair Corralation between Electro Ao and Marcopolo

Assuming the 90 days trading horizon Electro Ao Altona is expected to generate 0.58 times more return on investment than Marcopolo. However, Electro Ao Altona is 1.74 times less risky than Marcopolo. It trades about -0.17 of its potential returns per unit of risk. Marcopolo SA is currently generating about -0.35 per unit of risk. If you would invest  1,399  in Electro Ao Altona on September 24, 2024 and sell it today you would lose (85.00) from holding Electro Ao Altona or give up 6.08% of portfolio value over 90 days.

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

Electro Ao Altona  vs.  Marcopolo SA

Electro Ao Altona

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Electro Ao Altona has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Electro Ao is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Marcopolo SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Marcopolo SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Marcopolo is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Electro Ao and Marcopolo

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

The idea behind Electro Ao Altona and Marcopolo 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.

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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 Stocks Directory module to find actively traded stocks across global markets.