Correlation Between El Mor and Baran
Can any of the company-specific risk be diversified away by investing in both El Mor and Baran 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 El Mor and Baran into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between El Mor Electric Installation and Baran Group, you can compare the effects of market volatilities on El Mor and Baran 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 El Mor with a short position of Baran. Check out your portfolio center. Please also check ongoing floating volatility patterns of El Mor and Baran.
Diversification Opportunities for El Mor and Baran
Poor diversification
The 3 months correlation between ELMR and Baran is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding El Mor Electric Installation and Baran Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Baran Group and El Mor 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 El Mor Electric Installation are associated (or correlated) with Baran. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Baran Group has no effect on the direction of El Mor i.e., El Mor and Baran go up and down completely randomly.
Pair Corralation between El Mor and Baran
Assuming the 90 days trading horizon El Mor is expected to generate 1.74 times less return on investment than Baran. But when comparing it to its historical volatility, El Mor Electric Installation is 1.08 times less risky than Baran. It trades about 0.04 of its potential returns per unit of risk. Baran Group is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 98,000 in Baran Group on August 28, 2024 and sell it today you would earn a total of 52,000 from holding Baran Group or generate 53.06% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
El Mor Electric Installation vs. Baran Group
Performance |
| Timeline |
| El Mor Electric |
| Baran Group |
El Mor and Baran Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with El Mor and Baran
The main advantage of trading using opposite El Mor and Baran positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if El Mor position performs unexpectedly, Baran 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 Baran will offset losses from the drop in Baran's long position.The idea behind El Mor Electric Installation and Baran Group 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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