Correlation Between Highstreet and ELA
Can any of the company-specific risk be diversified away by investing in both Highstreet and ELA 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 Highstreet and ELA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Highstreet and ELA, you can compare the effects of market volatilities on Highstreet and ELA 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 Highstreet with a short position of ELA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Highstreet and ELA.
Diversification Opportunities for Highstreet and ELA
0.57 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Highstreet and ELA is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Highstreet and ELA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ELA and Highstreet 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 Highstreet are associated (or correlated) with ELA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ELA has no effect on the direction of Highstreet i.e., Highstreet and ELA go up and down completely randomly.
Pair Corralation between Highstreet and ELA
Assuming the 90 days trading horizon Highstreet is expected to generate 0.92 times more return on investment than ELA. However, Highstreet is 1.09 times less risky than ELA. It trades about 0.25 of its potential returns per unit of risk. ELA is currently generating about 0.2 per unit of risk. If you would invest 130.00 in Highstreet on August 28, 2024 and sell it today you would earn a total of 35.00 from holding Highstreet or generate 26.92% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Highstreet vs. ELA
Performance |
| Timeline |
| Highstreet |
| ELA |
Highstreet and ELA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Highstreet and ELA
The main advantage of trading using opposite Highstreet and ELA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Highstreet position performs unexpectedly, ELA 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 ELA will offset losses from the drop in ELA's long position.The idea behind Highstreet and ELA 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.
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