Correlation Between Electra and Baran
Can any of the company-specific risk be diversified away by investing in both Electra and Baran 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 Electra and Baran into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Electra and Baran Group, you can compare the effects of market volatilities on Electra and Baran 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 Electra with a short position of Baran. Check out your portfolio center. Please also check ongoing floating volatility patterns of Electra and Baran.
Diversification Opportunities for Electra and Baran
Very weak diversification
The 3 months correlation between Electra and Baran is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Electra and Baran Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Baran Group and Electra 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 Electra are associated (or correlated) with Baran. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Baran Group has no effect on the direction of Electra i.e., Electra and Baran go up and down completely randomly.
Pair Corralation between Electra and Baran
Assuming the 90 days trading horizon Electra is expected to under-perform the Baran. But the stock apears to be less risky and, when comparing its historical volatility, Electra is 1.01 times less risky than Baran. The stock trades about -0.35 of its potential returns per unit of risk. The Baran Group is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 105,900 in Baran Group on January 25, 2024 and sell it today you would earn a total of 4,400 from holding Baran Group or generate 4.15% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Electra vs. Baran Group
Performance |
| Timeline |
| Electra |
| Baran Group |
Electra and Baran Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Electra and Baran
The main advantage of trading using opposite Electra and Baran positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Electra position performs unexpectedly, Baran 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 Baran will offset losses from the drop in Baran's long position.The idea behind Electra and Baran Group 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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