Correlation Between Clarke and E L

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

By analyzing existing cross correlation between Clarke Inc and E L Financial Corp, you can compare the effects of market volatilities on Clarke 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 Clarke with a short position of E L. Check out your portfolio center. Please also check ongoing floating volatility patterns of Clarke and E L.

Diversification Opportunities for Clarke and E L

-0.72

Correlation Coefficient

Clarke  E L

Pay attention - limited upside

The 3 months correlation between Clarke and ELF is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding Clarke Inc 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 Clarke 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 Clarke Inc 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 Clarke i.e., Clarke and E L go up and down completely randomly.

Pair Corralation between Clarke and E L

Assuming the 90 days trading horizon Clarke Inc is expected to under-perform the E L. But the stock apears to be less risky and, when comparing its historical volatility, Clarke Inc is 5.25 times less risky than E L. The stock trades about -0.1 of its potential returns per unit of risk. The E L Financial Corp is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  129,388  in E L Financial Corp on September 12, 2024 and sell it today you would earn a total of  10,012  from holding E L Financial Corp or generate 7.74% return on investment over 90 days.

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

Clarke Inc  vs.  E L Financial Corp

Clarke Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Clarke Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy forward indicators, Clarke is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

E L Financial

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in E L Financial Corp are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating technical and fundamental indicators, E L may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Clarke and E L

The main advantage of trading using opposite Clarke and E L positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Clarke 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 Clarke Inc 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.