Correlation Between Renew Energy and Ellomay Capital

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

By analyzing existing cross correlation between Renew Energy Global and Ellomay Capital, you can compare the effects of market volatilities on Renew Energy and Ellomay Capital 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 Renew Energy with a short position of Ellomay Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Renew Energy and Ellomay Capital.

Diversification Opportunities for Renew Energy and Ellomay Capital

-0.36

Correlation Coefficient

Renew Energy  Ellomay Capital

Very good diversification

The 3 months correlation between Renew and Ellomay is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Renew Energy Global and Ellomay Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ellomay Capital and Renew Energy 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 Renew Energy Global are associated (or correlated) with Ellomay Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ellomay Capital has no effect on the direction of Renew Energy i.e., Renew Energy and Ellomay Capital go up and down completely randomly.

Pair Corralation between Renew Energy and Ellomay Capital

Considering the 90-day investment horizon Renew Energy is expected to generate 4.25 times less return on investment than Ellomay Capital. But when comparing it to its historical volatility, Renew Energy Global is 1.56 times less risky than Ellomay Capital. It trades about 0.06 of its potential returns per unit of risk. Ellomay Capital is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  1,260  in Ellomay Capital on September 3, 2024 and sell it today you would earn a total of  356.00  from holding Ellomay Capital or generate 28.25% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	92.19%
Values	Daily Returns

Renew Energy Global  vs.  Ellomay Capital

Renew Energy Global

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Renew Energy Global are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady basic indicators, Renew Energy may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Ellomay Capital

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Ellomay Capital are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain essential indicators, Ellomay Capital displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Renew Energy and Ellomay Capital

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

The idea behind Renew Energy Global and Ellomay Capital 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.