Correlation Between Core Molding and Element Solutions

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

By analyzing existing cross correlation between Core Molding Technologies and Element Solutions, you can compare the effects of market volatilities on Core Molding and Element Solutions 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 Core Molding with a short position of Element Solutions. Check out your portfolio center. Please also check ongoing floating volatility patterns of Core Molding and Element Solutions.

Diversification Opportunities for Core Molding and Element Solutions

0.57

Correlation Coefficient

Core Molding  Element Solutions

Very weak diversification

The 3 months correlation between Core and Element is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Core Molding Technologies and Element Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Element Solutions and Core Molding 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 Core Molding Technologies are associated (or correlated) with Element Solutions. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Element Solutions has no effect on the direction of Core Molding i.e., Core Molding and Element Solutions go up and down completely randomly.

Pair Corralation between Core Molding and Element Solutions

Considering the 90-day investment horizon Core Molding Technologies is expected to under-perform the Element Solutions. In addition to that, Core Molding is 1.44 times more volatile than Element Solutions. It trades about -0.18 of its total potential returns per unit of risk. Element Solutions is currently generating about -0.1 per unit of volatility. If you would invest  2,860  in Element Solutions on November 28, 2024 and sell it today you would lose (233.00) from holding Element Solutions or give up 8.15% of portfolio value over 90 days.

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

Core Molding Technologies  vs.  Element Solutions

Core Molding Technologies

Risk-Adjusted Performance

Very Weak

Over the last 90 days Core Molding Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's primary indicators remain comparatively stable which may send shares a bit higher in March 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Element Solutions

Risk-Adjusted Performance

Very Weak

Over the last 90 days Element Solutions has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Stock's basic indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Pair Trading with Core Molding and Element Solutions

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

The idea behind Core Molding Technologies and Element Solutions 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.