Correlation Between E M and Elpitiya Plantations
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By analyzing existing cross correlation between E M L and Elpitiya Plantations PLC, you can compare the effects of market volatilities on E M and Elpitiya Plantations 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 M with a short position of Elpitiya Plantations. Check out your portfolio center. Please also check ongoing floating volatility patterns of E M and Elpitiya Plantations.
Diversification Opportunities for E M and Elpitiya Plantations
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between EMLN0000 and Elpitiya is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding E M L and Elpitiya Plantations PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Elpitiya Plantations PLC and E M 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 M L are associated (or correlated) with Elpitiya Plantations. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Elpitiya Plantations PLC has no effect on the direction of E M i.e., E M and Elpitiya Plantations go up and down completely randomly.
Pair Corralation between E M and Elpitiya Plantations
Assuming the 90 days trading horizon E M is expected to generate 4.82 times less return on investment than Elpitiya Plantations. In addition to that, E M is 1.95 times more volatile than Elpitiya Plantations PLC. It trades about 0.01 of its total potential returns per unit of risk. Elpitiya Plantations PLC is currently generating about 0.08 per unit of volatility. If you would invest 8,250 in Elpitiya Plantations PLC on August 31, 2024 and sell it today you would earn a total of 2,650 from holding Elpitiya Plantations PLC or generate 32.12% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
E M L vs. Elpitiya Plantations PLC
Performance |
| Timeline |
| E M L |
| Elpitiya Plantations PLC |
E M and Elpitiya Plantations Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with E M and Elpitiya Plantations
The main advantage of trading using opposite E M and Elpitiya Plantations positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if E M position performs unexpectedly, Elpitiya Plantations 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 Elpitiya Plantations will offset losses from the drop in Elpitiya Plantations' long position.The idea behind E M L and Elpitiya Plantations PLC 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.| Elpitiya Plantations vs. Amana Bank | Elpitiya Plantations vs. Union Chemicals Lanka | Elpitiya Plantations vs. Commercial Credit and | Elpitiya Plantations vs. ACL Plastics PLC |
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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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