Correlation Between E L and Faction Investment
Can any of the company-specific risk be diversified away by investing in both E L and Faction Investment 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 Faction Investment 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 Faction Investment Group, you can compare the effects of market volatilities on E L and Faction Investment 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 Faction Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of E L and Faction Investment.
Diversification Opportunities for E L and Faction Investment
-0.36 | Correlation Coefficient |
Very good diversification
The 3 months correlation between ELF and Faction is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding E L Financial Corp and Faction Investment Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Faction Investment 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 Faction Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Faction Investment has no effect on the direction of E L i.e., E L and Faction Investment go up and down completely randomly.
Pair Corralation between E L and Faction Investment
Assuming the 90 days trading horizon E L is expected to generate 50.68 times less return on investment than Faction Investment. But when comparing it to its historical volatility, E L Financial Corp is 26.09 times less risky than Faction Investment. It trades about 0.12 of its potential returns per unit of risk. Faction Investment Group is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest 1.50 in Faction Investment Group on October 21, 2024 and sell it today you would earn a total of 3.50 from holding Faction Investment Group or generate 233.33% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
E L Financial Corp vs. Faction Investment Group
Performance |
| Timeline |
| E L Financial |
| Faction Investment |
E L and Faction Investment Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with E L and Faction Investment
The main advantage of trading using opposite E L and Faction Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if E L position performs unexpectedly, Faction Investment 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 Faction Investment will offset losses from the drop in Faction Investment's long position.| E L vs. Algoma Central | E L vs. Winpak | E L vs. Fairfax Financial Holdings | E L vs. Economic Investment Trust |
| Faction Investment vs. IGM Financial | Faction Investment vs. North American Construction | Faction Investment vs. Canadian Imperial Bank | Faction Investment vs. Millbank Mining 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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