Correlation Between E L and Premium Income
Can any of the company-specific risk be diversified away by investing in both E L and Premium Income 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 Premium Income 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 Premium Income, you can compare the effects of market volatilities on E L and Premium Income 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 Premium Income. Check out your portfolio center. Please also check ongoing floating volatility patterns of E L and Premium Income.
Diversification Opportunities for E L and Premium Income
0.42 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between ELF-PH and Premium is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding E L Financial 3 and Premium Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Premium Income 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 Premium Income. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Premium Income has no effect on the direction of E L i.e., E L and Premium Income go up and down completely randomly.
Pair Corralation between E L and Premium Income
Assuming the 90 days trading horizon E L Financial 3 is expected to generate 0.6 times more return on investment than Premium Income. However, E L Financial 3 is 1.66 times less risky than Premium Income. It trades about 0.14 of its potential returns per unit of risk. Premium Income is currently generating about -0.1 per unit of risk. If you would invest 2,238 in E L Financial 3 on September 14, 2024 and sell it today you would earn a total of 39.00 from holding E L Financial 3 or generate 1.74% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
E L Financial 3 vs. Premium Income
Performance |
| Timeline |
| E L Financial |
| Premium Income |
E L and Premium Income Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with E L and Premium Income
The main advantage of trading using opposite E L and Premium Income positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if E L position performs unexpectedly, Premium Income 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 Premium Income will offset losses from the drop in Premium Income's long position.| E L vs. Identillect Technologies Corp | E L vs. Quisitive Technology Solutions | E L vs. Calian Technologies | E L vs. Metalero Mining Corp |
| Premium Income vs. Berkshire Hathaway CDR | Premium Income vs. E L Financial Corp | Premium Income vs. E L Financial 3 | Premium Income vs. Molson Coors Canada |
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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