Correlation Between Yara International and E I

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

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

Diversification Opportunities for Yara International and E I

0.55

Correlation Coefficient

Yara International  E I

Very weak diversification

The 3 months correlation between Yara and CTA-PB is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Yara International ASA and E I du in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on E I du and Yara International 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 Yara International ASA are associated (or correlated) with E I. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of E I du has no effect on the direction of Yara International i.e., Yara International and E I go up and down completely randomly.

Pair Corralation between Yara International and E I

Assuming the 90 days horizon Yara International ASA is expected to generate 1.02 times more return on investment than E I. However, Yara International is 1.02 times more volatile than E I du. It trades about -0.01 of its potential returns per unit of risk. E I du is currently generating about -0.05 per unit of risk. If you would invest  2,842  in Yara International ASA on September 15, 2024 and sell it today you would lose (31.00) from holding Yara International ASA or give up 1.09% of portfolio value over 90 days.

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

Yara International ASA  vs.  E I du

Yara International ASA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Yara International ASA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable forward indicators, Yara International is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

E I du

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days E I du has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, E I is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Yara International and E I

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

The idea behind Yara International ASA and E I du 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 Global Correlations module to find global opportunities by holding instruments from different markets.