Correlation Between Elite Material and Cayenne Entertainment

Can any of the company-specific risk be diversified away by investing in both Elite Material and Cayenne Entertainment 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 Elite Material and Cayenne Entertainment into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Elite Material Co and Cayenne Entertainment Technology, you can compare the effects of market volatilities on Elite Material and Cayenne Entertainment 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 Elite Material with a short position of Cayenne Entertainment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Elite Material and Cayenne Entertainment.

Diversification Opportunities for Elite Material and Cayenne Entertainment

-0.24

Correlation Coefficient

Elite Material  Cayenne Entertainment

Very good diversification

The 3 months correlation between Elite and Cayenne is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding Elite Material Co and Cayenne Entertainment Technolo in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cayenne Entertainment and Elite Material 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 Elite Material Co are associated (or correlated) with Cayenne Entertainment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cayenne Entertainment has no effect on the direction of Elite Material i.e., Elite Material and Cayenne Entertainment go up and down completely randomly.

Pair Corralation between Elite Material and Cayenne Entertainment

Assuming the 90 days trading horizon Elite Material is expected to generate 12.65 times less return on investment than Cayenne Entertainment. But when comparing it to its historical volatility, Elite Material Co is 21.69 times less risky than Cayenne Entertainment. It trades about 0.1 of its potential returns per unit of risk. Cayenne Entertainment Technology is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  6,905  in Cayenne Entertainment Technology on October 11, 2024 and sell it today you would lose (3,070) from holding Cayenne Entertainment Technology or give up 44.46% of portfolio value over 90 days.

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

Elite Material Co  vs.  Cayenne Entertainment Technolo

Elite Material

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Elite Material Co are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Elite Material showed solid returns over the last few months and may actually be approaching a breakup point.

Cayenne Entertainment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cayenne Entertainment Technology has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Cayenne Entertainment is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Elite Material and Cayenne Entertainment

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

The idea behind Elite Material Co and Cayenne Entertainment Technology 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.