Correlation Between East Africa and CEOTRONICS (CEKSG)

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Can any of the company-specific risk be diversified away by investing in both East Africa and CEOTRONICS (CEKSG) 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 East Africa and CEOTRONICS (CEKSG) into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between East Africa Metals and CEOTRONICS, you can compare the effects of market volatilities on East Africa and CEOTRONICS (CEKSG) 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 East Africa with a short position of CEOTRONICS (CEKSG). Check out your portfolio center. Please also check ongoing floating volatility patterns of East Africa and CEOTRONICS (CEKSG).

Diversification Opportunities for East Africa and CEOTRONICS (CEKSG)

0.5
  Correlation Coefficient

Very weak diversification

The 3 months correlation between East and CEOTRONICS is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding East Africa Metals and CEOTRONICS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CEOTRONICS (CEKSG) and East Africa 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 East Africa Metals are associated (or correlated) with CEOTRONICS (CEKSG). Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CEOTRONICS (CEKSG) has no effect on the direction of East Africa i.e., East Africa and CEOTRONICS (CEKSG) go up and down completely randomly.

Pair Corralation between East Africa and CEOTRONICS (CEKSG)

Assuming the 90 days trading horizon East Africa Metals is expected to generate 1.93 times more return on investment than CEOTRONICS (CEKSG). However, East Africa is 1.93 times more volatile than CEOTRONICS. It trades about 0.17 of its potential returns per unit of risk. CEOTRONICS is currently generating about 0.09 per unit of risk. If you would invest  5.94  in East Africa Metals on February 18, 2024 and sell it today you would earn a total of  5.06  from holding East Africa Metals or generate 85.19% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

East Africa Metals  vs.  CEOTRONICS

 Performance 
       Timeline  
East Africa Metals 

Risk-Adjusted Performance

13 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in East Africa Metals are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, East Africa unveiled solid returns over the last few months and may actually be approaching a breakup point.
CEOTRONICS (CEKSG) 

Risk-Adjusted Performance

7 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in CEOTRONICS are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, CEOTRONICS (CEKSG) unveiled solid returns over the last few months and may actually be approaching a breakup point.

East Africa and CEOTRONICS (CEKSG) Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with East Africa and CEOTRONICS (CEKSG)

The main advantage of trading using opposite East Africa and CEOTRONICS (CEKSG) positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if East Africa position performs unexpectedly, CEOTRONICS (CEKSG) 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 CEOTRONICS (CEKSG) will offset losses from the drop in CEOTRONICS (CEKSG)'s long position.
The idea behind East Africa Metals and CEOTRONICS 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.

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