Correlation Between Laurentian Bank and E L

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Can any of the company-specific risk be diversified away by investing in both Laurentian Bank and E L 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 Laurentian Bank and E L into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Laurentian Bank and E L Financial Corp, you can compare the effects of market volatilities on Laurentian Bank and E L 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 Laurentian Bank with a short position of E L. Check out your portfolio center. Please also check ongoing floating volatility patterns of Laurentian Bank and E L.

Diversification Opportunities for Laurentian Bank and E L

LaurentianELFDiversified AwayLaurentianELFDiversified Away100%
-0.1
  Correlation Coefficient

Good diversification

The 3 months correlation between Laurentian and ELF is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Laurentian Bank and E L Financial Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on E L Financial and Laurentian Bank 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 Laurentian Bank are associated (or correlated) with E L. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of E L Financial has no effect on the direction of Laurentian Bank i.e., Laurentian Bank and E L go up and down completely randomly.

Pair Corralation between Laurentian Bank and E L

Assuming the 90 days horizon Laurentian Bank is expected to under-perform the E L. But the stock apears to be less risky and, when comparing its historical volatility, Laurentian Bank is 2.36 times less risky than E L. The stock trades about -0.32 of its potential returns per unit of risk. The E L Financial Corp is currently generating about -0.13 of returns per unit of risk over similar time horizon. If you would invest  152,500  in E L Financial Corp on November 25, 2024 and sell it today you would lose (8,396) from holding E L Financial Corp or give up 5.51% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Laurentian Bank  vs.  E L Financial Corp

 Performance 
JavaScript chart by amCharts 3.21.15Dec2025Feb -5051015
JavaScript chart by amCharts 3.21.15LB ELF
       Timeline  
Laurentian Bank 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
Over the last 90 days Laurentian Bank has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Laurentian Bank is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb2728293031
E L Financial 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
Over the last 90 days E L Financial Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy technical and fundamental indicators, E L is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.
JavaScript chart by amCharts 3.21.15SepOctDecJanFebOctDecJanFeb1,2001,2501,3001,3501,4001,4501,5001,550

Laurentian Bank and E L Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-1.89-1.41-0.93-0.45-0.0079290.420.91.381.86 0.050.100.150.200.25
JavaScript chart by amCharts 3.21.15LB ELF
       Returns  

Pair Trading with Laurentian Bank and E L

The main advantage of trading using opposite Laurentian Bank and E L positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Laurentian Bank position performs unexpectedly, E L 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 E L will offset losses from the drop in E L's long position.
The idea behind Laurentian Bank and E L Financial Corp 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.
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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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.

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