Correlation Between Elaia Investment and Bodegas Riojanas

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

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

Diversification Opportunities for Elaia Investment and Bodegas Riojanas

-0.03

Correlation Coefficient

Elaia Investment  Bodegas Riojanas

Good diversification

The 3 months correlation between Elaia and Bodegas is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Elaia Investment Spain and Bodegas Riojanas SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bodegas Riojanas and Elaia Investment 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 Elaia Investment Spain are associated (or correlated) with Bodegas Riojanas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bodegas Riojanas has no effect on the direction of Elaia Investment i.e., Elaia Investment and Bodegas Riojanas go up and down completely randomly.

Pair Corralation between Elaia Investment and Bodegas Riojanas

Assuming the 90 days trading horizon Elaia Investment Spain is expected to under-perform the Bodegas Riojanas. In addition to that, Elaia Investment is 1.65 times more volatile than Bodegas Riojanas SA. It trades about -0.15 of its total potential returns per unit of risk. Bodegas Riojanas SA is currently generating about 0.05 per unit of volatility. If you would invest  410.00  in Bodegas Riojanas SA on March 12, 2024 and sell it today you would earn a total of  16.00  from holding Bodegas Riojanas SA or generate 3.9% return on investment over 90 days.

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

Elaia Investment Spain  vs.  Bodegas Riojanas SA

Elaia Investment Spain

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Elaia Investment Spain has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in July 2024. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Bodegas Riojanas

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bodegas Riojanas SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Bodegas Riojanas is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Elaia Investment and Bodegas Riojanas

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

The idea behind Elaia Investment Spain and Bodegas Riojanas SA 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 Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.