Correlation Between Montea CVA and Econocom Group

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

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

Diversification Opportunities for Montea CVA and Econocom Group

0.31

Correlation Coefficient

Montea CVA  Econocom Group

Weak diversification

The 3 months correlation between Montea and Econocom is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Montea CVA and Econocom Group SANV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Econocom Group SANV and Montea CVA 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 Montea CVA are associated (or correlated) with Econocom Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Econocom Group SANV has no effect on the direction of Montea CVA i.e., Montea CVA and Econocom Group go up and down completely randomly.

Pair Corralation between Montea CVA and Econocom Group

Assuming the 90 days trading horizon Montea CVA is expected to under-perform the Econocom Group. But the stock apears to be less risky and, when comparing its historical volatility, Montea CVA is 1.07 times less risky than Econocom Group. The stock trades about -0.22 of its potential returns per unit of risk. The Econocom Group SANV is currently generating about -0.1 of returns per unit of risk over similar time horizon. If you would invest  204.00  in Econocom Group SANV on September 19, 2024 and sell it today you would lose (20.00) from holding Econocom Group SANV or give up 9.8% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.46%
Values	Daily Returns

Montea CVA  vs.  Econocom Group SANV

Montea CVA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Montea CVA has generated negative risk-adjusted returns adding no value to investors with long positions. Even with weak performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in January 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Econocom Group SANV

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Econocom Group SANV has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's fundamental drivers remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Montea CVA and Econocom Group

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

The idea behind Montea CVA and Econocom Group SANV 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.

Check out your portfolio center.

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.