Correlation Between Elco and Alrov Properties

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

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

Diversification Opportunities for Elco and Alrov Properties

0.98

Correlation Coefficient

Elco  Alrov Properties

Almost no diversification

The 3 months correlation between Elco and Alrov is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding Elco and Alrov Properties Lodgings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alrov Properties Lodgings and Elco 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 Elco are associated (or correlated) with Alrov Properties. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alrov Properties Lodgings has no effect on the direction of Elco i.e., Elco and Alrov Properties go up and down completely randomly.

Pair Corralation between Elco and Alrov Properties

Assuming the 90 days trading horizon Elco is expected to generate 1.06 times more return on investment than Alrov Properties. However, Elco is 1.06 times more volatile than Alrov Properties Lodgings. It trades about 0.05 of its potential returns per unit of risk. Alrov Properties Lodgings is currently generating about 0.03 per unit of risk. If you would invest  1,242,172  in Elco on September 12, 2024 and sell it today you would earn a total of  277,828  from holding Elco or generate 22.37% return on investment over 90 days.

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

Elco  vs.  Alrov Properties Lodgings

Elco

Risk-Adjusted Performance

28 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Elco are ranked lower than 28 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Elco sustained solid returns over the last few months and may actually be approaching a breakup point.

Alrov Properties Lodgings

Risk-Adjusted Performance

35 of 100

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Alrov Properties Lodgings are ranked lower than 35 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Alrov Properties unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Elco and Alrov Properties

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

The idea behind Elco and Alrov Properties Lodgings 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.