Correlation Between EchoStar and Renren

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

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

Diversification Opportunities for EchoStar and Renren

-0.4

Correlation Coefficient

EchoStar  Renren

Very good diversification

The 3 months correlation between EchoStar and Renren is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding EchoStar and Renren Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Renren Inc and EchoStar 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 EchoStar are associated (or correlated) with Renren. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Renren Inc has no effect on the direction of EchoStar i.e., EchoStar and Renren go up and down completely randomly.

Pair Corralation between EchoStar and Renren

If you would invest  1,295  in EchoStar on January 26, 2024 and sell it today you would earn a total of  293.00  from holding EchoStar or generate 22.63% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	4.76%
Values	Daily Returns

EchoStar  vs.  Renren Inc

EchoStar

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in EchoStar are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, EchoStar unveiled solid returns over the last few months and may actually be approaching a breakup point.

Renren Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Renren Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Renren is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with EchoStar and Renren

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

The idea behind EchoStar and Renren Inc 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.