Correlation Between E L and Theratechnologies
Can any of the company-specific risk be diversified away by investing in both E L and Theratechnologies 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 Theratechnologies 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 Theratechnologies, you can compare the effects of market volatilities on E L and Theratechnologies 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 Theratechnologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of E L and Theratechnologies.
Diversification Opportunities for E L and Theratechnologies
0.22 | Correlation Coefficient |
Modest diversification
The 3 months correlation between ELF and Theratechnologies is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding E L Financial Corp and Theratechnologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Theratechnologies 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 Theratechnologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Theratechnologies has no effect on the direction of E L i.e., E L and Theratechnologies go up and down completely randomly.
Pair Corralation between E L and Theratechnologies
Assuming the 90 days trading horizon E L is expected to generate 1.8 times less return on investment than Theratechnologies. But when comparing it to its historical volatility, E L Financial Corp is 4.69 times less risky than Theratechnologies. It trades about 0.12 of its potential returns per unit of risk. Theratechnologies is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 145.00 in Theratechnologies on September 12, 2024 and sell it today you would earn a total of 58.00 from holding Theratechnologies or generate 40.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
E L Financial Corp vs. Theratechnologies
Performance |
| Timeline |
| E L Financial |
| Theratechnologies |
E L and Theratechnologies Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with E L and Theratechnologies
The main advantage of trading using opposite E L and Theratechnologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if E L position performs unexpectedly, Theratechnologies 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 Theratechnologies will offset losses from the drop in Theratechnologies' long position.| E L vs. Algoma Central | E L vs. Winpak | E L vs. Fairfax Financial Holdings | E L vs. Economic Investment Trust |
| Theratechnologies vs. Premium Income | Theratechnologies vs. E L Financial Corp | Theratechnologies vs. Fairfax Financial Holdings | Theratechnologies vs. Fairfax Fin Hld |
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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
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