Correlation Between E L and Entourage Health

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Can any of the company-specific risk be diversified away by investing in both E L and Entourage Health 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 Entourage Health into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between E L Financial Corp and Entourage Health Corp, you can compare the effects of market volatilities on E L and Entourage Health 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 Entourage Health. Check out your portfolio center. Please also check ongoing floating volatility patterns of E L and Entourage Health.

Diversification Opportunities for E L and Entourage Health

-0.44
  Correlation Coefficient

Very good diversification

The 3 months correlation between ELF and Entourage is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding E L Financial Corp and Entourage Health Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Entourage Health Corp 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 Corp are associated (or correlated) with Entourage Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Entourage Health Corp has no effect on the direction of E L i.e., E L and Entourage Health go up and down completely randomly.

Pair Corralation between E L and Entourage Health

Assuming the 90 days trading horizon E L Financial Corp is expected to under-perform the Entourage Health. But the stock apears to be less risky and, when comparing its historical volatility, E L Financial Corp is 40.21 times less risky than Entourage Health. The stock trades about -0.2 of its potential returns per unit of risk. The Entourage Health Corp is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest  0.50  in Entourage Health Corp on September 13, 2024 and sell it today you would earn a total of  0.50  from holding Entourage Health Corp or generate 100.0% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

E L Financial Corp  vs.  Entourage Health Corp

 Performance 
       Timeline  
E L Financial 

Risk-Adjusted Performance

7 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in E L Financial Corp are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating technical and fundamental indicators, E L may actually be approaching a critical reversion point that can send shares even higher in January 2025.
Entourage Health Corp 

Risk-Adjusted Performance

12 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Entourage Health Corp are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Entourage Health showed solid returns over the last few months and may actually be approaching a breakup point.

E L and Entourage Health Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with E L and Entourage Health

The main advantage of trading using opposite E L and Entourage Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if E L position performs unexpectedly, Entourage Health 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 Entourage Health will offset losses from the drop in Entourage Health's long position.
The idea behind E L Financial Corp and Entourage Health Corp pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.

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