Correlation Between Element Fleet and Definity Financial
Can any of the company-specific risk be diversified away by investing in both Element Fleet and Definity Financial 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 Element Fleet and Definity Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Element Fleet Management and Definity Financial Corp, you can compare the effects of market volatilities on Element Fleet and Definity Financial 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 Element Fleet with a short position of Definity Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Element Fleet and Definity Financial.
Diversification Opportunities for Element Fleet and Definity Financial
0.62 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Element and Definity is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Element Fleet Management and Definity Financial Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Definity Financial Corp and Element Fleet 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 Element Fleet Management are associated (or correlated) with Definity Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Definity Financial Corp has no effect on the direction of Element Fleet i.e., Element Fleet and Definity Financial go up and down completely randomly.
Pair Corralation between Element Fleet and Definity Financial
Assuming the 90 days trading horizon Element Fleet is expected to generate 4.11 times less return on investment than Definity Financial. In addition to that, Element Fleet is 1.34 times more volatile than Definity Financial Corp. It trades about 0.04 of its total potential returns per unit of risk. Definity Financial Corp is currently generating about 0.21 per unit of volatility. If you would invest 5,501 in Definity Financial Corp on September 13, 2024 and sell it today you would earn a total of 340.00 from holding Definity Financial Corp or generate 6.18% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Element Fleet Management vs. Definity Financial Corp
Performance |
| Timeline |
| Element Fleet Management |
| Definity Financial Corp |
Element Fleet and Definity Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Element Fleet and Definity Financial
The main advantage of trading using opposite Element Fleet and Definity Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Element Fleet position performs unexpectedly, Definity Financial 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 Definity Financial will offset losses from the drop in Definity Financial's long position.| Element Fleet vs. ECN Capital Corp | Element Fleet vs. Martinrea International | Element Fleet vs. CCL Industries | Element Fleet vs. FirstService Corp |
| Definity Financial vs. Trisura Group | Definity Financial vs. Pet Valu Holdings | Definity Financial vs. Intact Financial | Definity Financial vs. Topaz Energy Corp |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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