Correlation Between Elite Material and Alar Pharmaceuticals
Can any of the company-specific risk be diversified away by investing in both Elite Material and Alar Pharmaceuticals 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 Elite Material and Alar Pharmaceuticals into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Elite Material Co and Alar Pharmaceuticals, you can compare the effects of market volatilities on Elite Material and Alar Pharmaceuticals 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 Elite Material with a short position of Alar Pharmaceuticals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Elite Material and Alar Pharmaceuticals.
Diversification Opportunities for Elite Material and Alar Pharmaceuticals
-0.81 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Elite and Alar is -0.81. Overlapping area represents the amount of risk that can be diversified away by holding Elite Material Co and Alar Pharmaceuticals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alar Pharmaceuticals and Elite Material 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 Elite Material Co are associated (or correlated) with Alar Pharmaceuticals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alar Pharmaceuticals has no effect on the direction of Elite Material i.e., Elite Material and Alar Pharmaceuticals go up and down completely randomly.
Pair Corralation between Elite Material and Alar Pharmaceuticals
Assuming the 90 days trading horizon Elite Material Co is expected to generate 0.89 times more return on investment than Alar Pharmaceuticals. However, Elite Material Co is 1.13 times less risky than Alar Pharmaceuticals. It trades about 0.16 of its potential returns per unit of risk. Alar Pharmaceuticals is currently generating about -0.08 per unit of risk. If you would invest 38,800 in Elite Material Co on November 3, 2024 and sell it today you would earn a total of 22,600 from holding Elite Material Co or generate 58.25% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Elite Material Co vs. Alar Pharmaceuticals
Performance |
| Timeline |
| Elite Material |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Solid
| Alar Pharmaceuticals |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Elite Material and Alar Pharmaceuticals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Elite Material and Alar Pharmaceuticals
The main advantage of trading using opposite Elite Material and Alar Pharmaceuticals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Elite Material position performs unexpectedly, Alar Pharmaceuticals 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 Alar Pharmaceuticals will offset losses from the drop in Alar Pharmaceuticals' long position.The idea behind Elite Material Co and Alar Pharmaceuticals 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.Check out your portfolio center.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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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