Correlation Between Algoma Central and E L
Can any of the company-specific risk be diversified away by investing in both Algoma Central and E L 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 Algoma Central and E L into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Algoma Central and E L Financial Corp, you can compare the effects of market volatilities on Algoma Central and E L 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 Algoma Central with a short position of E L. Check out your portfolio center. Please also check ongoing floating volatility patterns of Algoma Central and E L.
Diversification Opportunities for Algoma Central and E L
0.22 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Algoma and ELF is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Algoma Central and E L Financial Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on E L Financial and Algoma Central 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 Algoma Central are associated (or correlated) with E L. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of E L Financial has no effect on the direction of Algoma Central i.e., Algoma Central and E L go up and down completely randomly.
Pair Corralation between Algoma Central and E L
Assuming the 90 days trading horizon Algoma Central is expected to generate 34.13 times less return on investment than E L. But when comparing it to its historical volatility, Algoma Central is 2.3 times less risky than E L. It trades about 0.02 of its potential returns per unit of risk. E L Financial Corp is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest 131,500 in E L Financial Corp on August 29, 2024 and sell it today you would earn a total of 16,000 from holding E L Financial Corp or generate 12.17% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Algoma Central vs. E L Financial Corp
Performance |
| Timeline |
| Algoma Central |
| E L Financial |
Algoma Central and E L Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Algoma Central and E L
The main advantage of trading using opposite Algoma Central and E L positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Algoma Central position performs unexpectedly, E L 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 E L will offset losses from the drop in E L's long position.| Algoma Central vs. Ritchie Bros Auctioneers | Algoma Central vs. Winpak | Algoma Central vs. North West | Algoma Central vs. Altus Group Limited |
| E L vs. Algoma Central | E L vs. Winpak | E L vs. Fairfax Financial Holdings | E L vs. Economic Investment Trust |
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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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