Correlation Between Core Molding and Element Solutions
Can any of the company-specific risk be diversified away by investing in both Core Molding and Element Solutions 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 Core Molding and Element Solutions into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Core Molding Technologies and Element Solutions, you can compare the effects of market volatilities on Core Molding and Element Solutions 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 Core Molding with a short position of Element Solutions. Check out your portfolio center. Please also check ongoing floating volatility patterns of Core Molding and Element Solutions.
Diversification Opportunities for Core Molding and Element Solutions
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Core and Element is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Core Molding Technologies and Element Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Element Solutions and Core Molding 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 Core Molding Technologies are associated (or correlated) with Element Solutions. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Element Solutions has no effect on the direction of Core Molding i.e., Core Molding and Element Solutions go up and down completely randomly.
Pair Corralation between Core Molding and Element Solutions
Considering the 90-day investment horizon Core Molding Technologies is expected to under-perform the Element Solutions. In addition to that, Core Molding is 1.54 times more volatile than Element Solutions. It trades about -0.28 of its total potential returns per unit of risk. Element Solutions is currently generating about 0.03 per unit of volatility. If you would invest 2,595 in Element Solutions on November 18, 2024 and sell it today you would earn a total of 18.00 from holding Element Solutions or generate 0.69% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Core Molding Technologies vs. Element Solutions
Performance |
| Timeline |
| Core Molding Technologies |
| Element Solutions |
Core Molding and Element Solutions Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Core Molding and Element Solutions
The main advantage of trading using opposite Core Molding and Element Solutions positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Core Molding position performs unexpectedly, Element Solutions 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 Element Solutions will offset losses from the drop in Element Solutions' long position.| Core Molding vs. Innospec | Core Molding vs. H B Fuller | Core Molding vs. Quaker Chemical | Core Molding vs. Minerals Technologies |
| Element Solutions vs. Oil Dri | Element Solutions vs. Quaker Chemical | Element Solutions vs. Ecovyst | Element Solutions vs. Minerals Technologies |
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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