Correlation Between Diplomat Holdings and Elco
Can any of the company-specific risk be diversified away by investing in both Diplomat Holdings and Elco 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 Diplomat Holdings and Elco into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Diplomat Holdings and Elco, you can compare the effects of market volatilities on Diplomat Holdings and Elco 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 Diplomat Holdings with a short position of Elco. Check out your portfolio center. Please also check ongoing floating volatility patterns of Diplomat Holdings and Elco.
Diversification Opportunities for Diplomat Holdings and Elco
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Diplomat and Elco is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Diplomat Holdings and Elco in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Elco and Diplomat Holdings 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 Diplomat Holdings are associated (or correlated) with Elco. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Elco has no effect on the direction of Diplomat Holdings i.e., Diplomat Holdings and Elco go up and down completely randomly.
Pair Corralation between Diplomat Holdings and Elco
Assuming the 90 days trading horizon Diplomat Holdings is expected to generate 1.93 times more return on investment than Elco. However, Diplomat Holdings is 1.93 times more volatile than Elco. It trades about 0.44 of its potential returns per unit of risk. Elco is currently generating about 0.54 per unit of risk. If you would invest 349,200 in Diplomat Holdings on September 1, 2024 and sell it today you would earn a total of 83,000 from holding Diplomat Holdings or generate 23.77% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Diplomat Holdings vs. Elco
Performance |
| Timeline |
| Diplomat Holdings |
| Elco |
Diplomat Holdings and Elco Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Diplomat Holdings and Elco
The main advantage of trading using opposite Diplomat Holdings and Elco positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Diplomat Holdings position performs unexpectedly, Elco 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 Elco will offset losses from the drop in Elco's long position.| Diplomat Holdings vs. Nrgene Technologies | Diplomat Holdings vs. Isras Investment | Diplomat Holdings vs. Hiron Trade Investments Industrial | Diplomat Holdings vs. GODM Investments |
| Elco vs. Alony Hetz Properties | Elco vs. Electra | Elco vs. Clal Insurance Enterprises | Elco vs. Delek Automotive Systems |
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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.
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