Correlation Between Echo Investment and Bank Handlowy

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

By analyzing existing cross correlation between Echo Investment SA and Bank Handlowy w, you can compare the effects of market volatilities on Echo Investment and Bank Handlowy 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 Echo Investment with a short position of Bank Handlowy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Echo Investment and Bank Handlowy.

Diversification Opportunities for Echo Investment and Bank Handlowy

-0.1

Correlation Coefficient

Echo Investment  Bank Handlowy

Good diversification

The 3 months correlation between Echo and Bank is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Echo Investment SA and Bank Handlowy w in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank Handlowy w and Echo Investment 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 Echo Investment SA are associated (or correlated) with Bank Handlowy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bank Handlowy w has no effect on the direction of Echo Investment i.e., Echo Investment and Bank Handlowy go up and down completely randomly.

Pair Corralation between Echo Investment and Bank Handlowy

Assuming the 90 days trading horizon Echo Investment SA is expected to generate 2.1 times more return on investment than Bank Handlowy. However, Echo Investment is 2.1 times more volatile than Bank Handlowy w. It trades about 0.14 of its potential returns per unit of risk. Bank Handlowy w is currently generating about 0.16 per unit of risk. If you would invest  436.00  in Echo Investment SA on September 30, 2024 and sell it today you would earn a total of  27.00  from holding Echo Investment SA or generate 6.19% return on investment over 90 days.

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

Echo Investment SA  vs.  Bank Handlowy w

Echo Investment SA

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Echo Investment SA are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Echo Investment may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Bank Handlowy w

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bank Handlowy w has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Bank Handlowy is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Echo Investment and Bank Handlowy

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

The idea behind Echo Investment SA and Bank Handlowy w 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.