Correlation Between E L and Power Financial
Can any of the company-specific risk be diversified away by investing in both E L and Power Financial 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 Power Financial 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 Power Financial Corp, you can compare the effects of market volatilities on E L and Power Financial 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 Power Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of E L and Power Financial.
Diversification Opportunities for E L and Power Financial
0.12 | Correlation Coefficient |
Average diversification
The 3 months correlation between ELF and Power is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding E L Financial Corp and Power Financial Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Power Financial 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 Power Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Power Financial Corp has no effect on the direction of E L i.e., E L and Power Financial go up and down completely randomly.
Pair Corralation between E L and Power Financial
Assuming the 90 days trading horizon E L Financial Corp is expected to generate 6.49 times more return on investment than Power Financial. However, E L is 6.49 times more volatile than Power Financial Corp. It trades about 0.11 of its potential returns per unit of risk. Power Financial Corp is currently generating about 0.03 per unit of risk. If you would invest 130,000 in E L Financial Corp on November 9, 2024 and sell it today you would earn a total of 9,375 from holding E L Financial Corp or generate 7.21% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 95.65% |
| Values | Daily Returns |
E L Financial Corp vs. Power Financial Corp
Performance |
| Timeline |
| E L Financial |
| Power Financial Corp |
E L and Power Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with E L and Power Financial
The main advantage of trading using opposite E L and Power Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if E L position performs unexpectedly, Power Financial 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 Power Financial will offset losses from the drop in Power Financial's long position.| E L vs. Algoma Central | E L vs. Winpak | E L vs. Fairfax Financial Holdings | E L vs. Economic Investment Trust |
| Power Financial vs. E L Financial 3 | Power Financial vs. Advent Wireless | Power Financial vs. Canlan Ice Sports | Power Financial vs. TGS Esports |
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 CEOs Directory module to screen CEOs from public companies around the world.
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