Correlation Between Rotshtein and Electra

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

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

Diversification Opportunities for Rotshtein and Electra

0.91

Correlation Coefficient

Rotshtein  Electra

Almost no diversification

The 3 months correlation between Rotshtein and Electra is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Rotshtein and Electra in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Electra and Rotshtein 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 Rotshtein are associated (or correlated) with Electra. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Electra has no effect on the direction of Rotshtein i.e., Rotshtein and Electra go up and down completely randomly.

Pair Corralation between Rotshtein and Electra

Assuming the 90 days trading horizon Rotshtein is expected to generate 2.4 times less return on investment than Electra. But when comparing it to its historical volatility, Rotshtein is 1.09 times less risky than Electra. It trades about 0.08 of its potential returns per unit of risk. Electra is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  19,000,000  in Electra on September 28, 2024 and sell it today you would earn a total of  1,560,000  from holding Electra or generate 8.21% return on investment over 90 days.

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

Rotshtein  vs.  Electra

Rotshtein

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Rotshtein are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Rotshtein sustained solid returns over the last few months and may actually be approaching a breakup point.

Electra

Risk-Adjusted Performance

25 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Electra are ranked lower than 25 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Electra sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Rotshtein and Electra

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

The idea behind Rotshtein and Electra 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.