Correlation Between ECN Capital and Martinrea International

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

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

Diversification Opportunities for ECN Capital and Martinrea International

0.36

Correlation Coefficient

ECN Capital  Martinrea International

Weak diversification

The 3 months correlation between ECN and Martinrea is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding ECN Capital Corp and Martinrea International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Martinrea International and ECN Capital 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 ECN Capital Corp are associated (or correlated) with Martinrea International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Martinrea International has no effect on the direction of ECN Capital i.e., ECN Capital and Martinrea International go up and down completely randomly.

Pair Corralation between ECN Capital and Martinrea International

Assuming the 90 days trading horizon ECN Capital Corp is expected to under-perform the Martinrea International. In addition to that, ECN Capital is 2.96 times more volatile than Martinrea International. It trades about -0.11 of its total potential returns per unit of risk. Martinrea International is currently generating about 0.02 per unit of volatility. If you would invest  1,190  in Martinrea International on March 4, 2024 and sell it today you would earn a total of  9.00  from holding Martinrea International or generate 0.76% return on investment over 90 days.

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

ECN Capital Corp  vs.  Martinrea International

ECN Capital Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ECN Capital Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in July 2024. The recent disarray may also be a sign of long period up-swing for the firm investors.

Martinrea International

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Martinrea International are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy technical and fundamental indicators, Martinrea International is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with ECN Capital and Martinrea International

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

The idea behind ECN Capital Corp and Martinrea International 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..