Correlation Between E L and Madison Pacific
Can any of the company-specific risk be diversified away by investing in both E L and Madison Pacific 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 Madison Pacific 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 Madison Pacific Properties, you can compare the effects of market volatilities on E L and Madison Pacific 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 Madison Pacific. Check out your portfolio center. Please also check ongoing floating volatility patterns of E L and Madison Pacific.
Diversification Opportunities for E L and Madison Pacific
-0.37 | Correlation Coefficient |
Very good diversification
The 3 months correlation between ELF and Madison is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding E L Financial Corp and Madison Pacific Properties in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Madison Pacific Prop 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 Madison Pacific. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Madison Pacific Prop has no effect on the direction of E L i.e., E L and Madison Pacific go up and down completely randomly.
Pair Corralation between E L and Madison Pacific
Assuming the 90 days trading horizon E L is expected to generate 1.32 times less return on investment than Madison Pacific. But when comparing it to its historical volatility, E L Financial Corp is 2.0 times less risky than Madison Pacific. It trades about 0.1 of its potential returns per unit of risk. Madison Pacific Properties is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 410.00 in Madison Pacific Properties on August 31, 2024 and sell it today you would earn a total of 40.00 from holding Madison Pacific Properties or generate 9.76% 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. Madison Pacific Properties
Performance |
| Timeline |
| E L Financial |
| Madison Pacific Prop |
E L and Madison Pacific Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with E L and Madison Pacific
The main advantage of trading using opposite E L and Madison Pacific positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if E L position performs unexpectedly, Madison Pacific 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 Madison Pacific will offset losses from the drop in Madison Pacific's long position.| E L vs. iShares Canadian HYBrid | E L vs. Brompton European Dividend | E L vs. Solar Alliance Energy | E L vs. PHN Multi Style All Cap |
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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 Transaction History module to view history of all your transactions and understand their impact on performance.
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