Correlation Between ECN Capital and Japan Gold

Can any of the company-specific risk be diversified away by investing in both ECN Capital and Japan Gold 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 Japan Gold 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 Japan Gold Corp, you can compare the effects of market volatilities on ECN Capital and Japan Gold 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 Japan Gold. Check out your portfolio center. Please also check ongoing floating volatility patterns of ECN Capital and Japan Gold.

Diversification Opportunities for ECN Capital and Japan Gold

-0.87

Correlation Coefficient

ECN Capital  Japan Gold

Pay attention - limited upside

The 3 months correlation between ECN and Japan is -0.87. Overlapping area represents the amount of risk that can be diversified away by holding ECN Capital Corp and Japan Gold Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Japan Gold Corp 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 Japan Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Japan Gold Corp has no effect on the direction of ECN Capital i.e., ECN Capital and Japan Gold go up and down completely randomly.

Pair Corralation between ECN Capital and Japan Gold

Assuming the 90 days trading horizon ECN Capital Corp is expected to generate 0.46 times more return on investment than Japan Gold. However, ECN Capital Corp is 2.19 times less risky than Japan Gold. It trades about -0.12 of its potential returns per unit of risk. Japan Gold Corp is currently generating about -0.17 per unit of risk. If you would invest  199.00  in ECN Capital Corp on February 5, 2024 and sell it today you would lose (19.00) from holding ECN Capital Corp or give up 9.55% of portfolio value over 90 days.

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

ECN Capital Corp  vs.  Japan Gold Corp

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 June 2024. The recent disarray may also be a sign of long period up-swing for the firm investors.

Japan Gold Corp

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Japan Gold Corp are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Japan Gold showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ECN Capital and Japan Gold

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

The idea behind ECN Capital Corp and Japan Gold Corp 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.