Correlation Between Associated Capital and Great Elm

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

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

Diversification Opportunities for Associated Capital and Great Elm

0.64

Correlation Coefficient

Associated Capital  Great Elm

Poor diversification

The 3 months correlation between Associated and Great is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Associated Capital Group and Great Elm Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Great Elm Group and Associated 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 Associated Capital Group are associated (or correlated) with Great Elm. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Great Elm Group has no effect on the direction of Associated Capital i.e., Associated Capital and Great Elm go up and down completely randomly.

Pair Corralation between Associated Capital and Great Elm

Allowing for the 90-day total investment horizon Associated Capital Group is expected to generate 0.89 times more return on investment than Great Elm. However, Associated Capital Group is 1.12 times less risky than Great Elm. It trades about 0.39 of its potential returns per unit of risk. Great Elm Group is currently generating about 0.01 per unit of risk. If you would invest  3,322  in Associated Capital Group on July 15, 2024 and sell it today you would earn a total of  338.00  from holding Associated Capital Group or generate 10.17% return on investment over 90 days.

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

Associated Capital Group  vs.  Great Elm Group

Associated Capital

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Associated Capital Group are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain fundamental indicators, Associated Capital exhibited solid returns over the last few months and may actually be approaching a breakup point.

Great Elm Group

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Great Elm Group are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent technical and fundamental indicators, Great Elm is not utilizing all of its potentials. The recent stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Associated Capital and Great Elm

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

The idea behind Associated Capital Group and Great Elm 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.

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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 Transaction History module to view history of all your transactions and understand their impact on performance.