Correlation Between Encavis AG and CHUGOKU EL

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

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

Diversification Opportunities for Encavis AG and CHUGOKU EL

-0.45

Correlation Coefficient

Encavis AG  CHUGOKU EL

Very good diversification

The 3 months correlation between Encavis and CHUGOKU is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Encavis AG and CHUGOKU EL PWR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CHUGOKU EL PWR and Encavis AG 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 Encavis AG are associated (or correlated) with CHUGOKU EL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CHUGOKU EL PWR has no effect on the direction of Encavis AG i.e., Encavis AG and CHUGOKU EL go up and down completely randomly.

Pair Corralation between Encavis AG and CHUGOKU EL

Assuming the 90 days horizon Encavis AG is expected to generate 0.14 times more return on investment than CHUGOKU EL. However, Encavis AG is 6.93 times less risky than CHUGOKU EL. It trades about 0.08 of its potential returns per unit of risk. CHUGOKU EL PWR is currently generating about -0.07 per unit of risk. If you would invest  1,706  in Encavis AG on September 13, 2024 and sell it today you would earn a total of  30.00  from holding Encavis AG or generate 1.76% return on investment over 90 days.

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

Encavis AG  vs.  CHUGOKU EL PWR

Encavis AG

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Encavis AG are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Encavis AG is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

CHUGOKU EL PWR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CHUGOKU EL PWR has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Encavis AG and CHUGOKU EL

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

The idea behind Encavis AG and CHUGOKU EL PWR 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.