Correlation Between E L and Diamond Estates
Can any of the company-specific risk be diversified away by investing in both E L and Diamond Estates 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 E L and Diamond Estates into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between E L Financial 3 and Diamond Estates Wines, you can compare the effects of market volatilities on E L and Diamond Estates 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 E L with a short position of Diamond Estates. Check out your portfolio center. Please also check ongoing floating volatility patterns of E L and Diamond Estates.
Diversification Opportunities for E L and Diamond Estates
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between ELF-PH and Diamond is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding E L Financial 3 and Diamond Estates Wines in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Diamond Estates Wines and E L 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 E L Financial 3 are associated (or correlated) with Diamond Estates. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Diamond Estates Wines has no effect on the direction of E L i.e., E L and Diamond Estates go up and down completely randomly.
Pair Corralation between E L and Diamond Estates
Assuming the 90 days trading horizon E L Financial 3 is expected to generate 0.12 times more return on investment than Diamond Estates. However, E L Financial 3 is 8.58 times less risky than Diamond Estates. It trades about -0.3 of its potential returns per unit of risk. Diamond Estates Wines is currently generating about -0.18 per unit of risk. If you would invest 2,327 in E L Financial 3 on August 24, 2024 and sell it today you would lose (97.00) from holding E L Financial 3 or give up 4.17% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.65% |
| Values | Daily Returns |
E L Financial 3 vs. Diamond Estates Wines
Performance |
| Timeline |
| E L Financial |
| Diamond Estates Wines |
E L and Diamond Estates Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with E L and Diamond Estates
The main advantage of trading using opposite E L and Diamond Estates positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if E L position performs unexpectedly, Diamond Estates 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 Diamond Estates will offset losses from the drop in Diamond Estates' long position.| E L vs. Fairfax Financial Holdings | E L vs. Fairfax Financial Holdings | E L vs. Fairfax Financial Holdings | E L vs. Fairfax Financial Holdings |
| Diamond Estates vs. Primaris Retail RE | Diamond Estates vs. Canso Select Opportunities | Diamond Estates vs. Goodfood Market Corp | Diamond Estates vs. Profound Medical 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 Global Correlations module to find global opportunities by holding instruments from different markets.
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