Correlation Between Eit Environmental and Elite Color

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

By analyzing existing cross correlation between Eit Environmental Development and Elite Color Environmental, you can compare the effects of market volatilities on Eit Environmental and Elite Color 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 Eit Environmental with a short position of Elite Color. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eit Environmental and Elite Color.

Diversification Opportunities for Eit Environmental and Elite Color

0.73

Correlation Coefficient

Eit Environmental  Elite Color

Poor diversification

The 3 months correlation between Eit and Elite is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Eit Environmental Development and Elite Color Environmental in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Elite Color Environmental and Eit Environmental 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 Eit Environmental Development are associated (or correlated) with Elite Color. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Elite Color Environmental has no effect on the direction of Eit Environmental i.e., Eit Environmental and Elite Color go up and down completely randomly.

Pair Corralation between Eit Environmental and Elite Color

Assuming the 90 days trading horizon Eit Environmental Development is expected to generate 1.14 times more return on investment than Elite Color. However, Eit Environmental is 1.14 times more volatile than Elite Color Environmental. It trades about 0.02 of its potential returns per unit of risk. Elite Color Environmental is currently generating about 0.0 per unit of risk. If you would invest  1,331  in Eit Environmental Development on October 5, 2024 and sell it today you would earn a total of  175.00  from holding Eit Environmental Development or generate 13.15% return on investment over 90 days.

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

Eit Environmental Development  vs.  Elite Color Environmental

Eit Environmental

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Eit Environmental Development has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Eit Environmental is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Elite Color Environmental

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Elite Color Environmental has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Elite Color is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Eit Environmental and Elite Color

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

The idea behind Eit Environmental Development and Elite Color Environmental 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.