Correlation Between Elmos Semiconductor and Ithaca Energy

Can any of the company-specific risk be diversified away by investing in both Elmos Semiconductor and Ithaca Energy 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 Elmos Semiconductor and Ithaca Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Elmos Semiconductor SE and Ithaca Energy PLC, you can compare the effects of market volatilities on Elmos Semiconductor and Ithaca Energy 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 Elmos Semiconductor with a short position of Ithaca Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Elmos Semiconductor and Ithaca Energy.

Diversification Opportunities for Elmos Semiconductor and Ithaca Energy

0.77

Correlation Coefficient

Elmos Semiconductor  Ithaca Energy

Poor diversification

The 3 months correlation between Elmos and Ithaca is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Elmos Semiconductor SE and Ithaca Energy PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ithaca Energy PLC and Elmos Semiconductor 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 Elmos Semiconductor SE are associated (or correlated) with Ithaca Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ithaca Energy PLC has no effect on the direction of Elmos Semiconductor i.e., Elmos Semiconductor and Ithaca Energy go up and down completely randomly.

Pair Corralation between Elmos Semiconductor and Ithaca Energy

Assuming the 90 days trading horizon Elmos Semiconductor is expected to generate 1.99 times less return on investment than Ithaca Energy. In addition to that, Elmos Semiconductor is 1.45 times more volatile than Ithaca Energy PLC. It trades about 0.25 of its total potential returns per unit of risk. Ithaca Energy PLC is currently generating about 0.71 per unit of volatility. If you would invest  10,300  in Ithaca Energy PLC on October 24, 2024 and sell it today you would earn a total of  3,440  from holding Ithaca Energy PLC or generate 33.4% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Elmos Semiconductor SE  vs.  Ithaca Energy PLC

Elmos Semiconductor

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Elmos Semiconductor SE are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Elmos Semiconductor unveiled solid returns over the last few months and may actually be approaching a breakup point.

Ithaca Energy PLC

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Ithaca Energy PLC are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Ithaca Energy exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Elmos Semiconductor and Ithaca Energy

The main advantage of trading using opposite Elmos Semiconductor and Ithaca Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Elmos Semiconductor position performs unexpectedly, Ithaca Energy 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 Ithaca Energy will offset losses from the drop in Ithaca Energy's long position.

The idea behind Elmos Semiconductor SE and Ithaca Energy 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.

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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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.