Correlation Between Elkhorn and Continental Beverage

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

By analyzing existing cross correlation between Elkhorn and Continental Beverage Brands, you can compare the effects of market volatilities on Elkhorn and Continental Beverage 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 Elkhorn with a short position of Continental Beverage. Check out your portfolio center. Please also check ongoing floating volatility patterns of Elkhorn and Continental Beverage.

Diversification Opportunities for Elkhorn and Continental Beverage

0.04

Correlation Coefficient

Elkhorn  Continental Beverage

Significant diversification

The 3 months correlation between Elkhorn and Continental is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Elkhorn and Continental Beverage Brands in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Continental Beverage and Elkhorn 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 Elkhorn are associated (or correlated) with Continental Beverage. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Continental Beverage has no effect on the direction of Elkhorn i.e., Elkhorn and Continental Beverage go up and down completely randomly.

Pair Corralation between Elkhorn and Continental Beverage

If you would invest  18.00  in Continental Beverage Brands on September 17, 2024 and sell it today you would earn a total of  47.00  from holding Continental Beverage Brands or generate 261.11% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	1.56%
Values	Daily Returns

Elkhorn  vs.  Continental Beverage Brands

Elkhorn

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Elkhorn has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Elkhorn is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Continental Beverage

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Continental Beverage Brands are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak fundamental drivers, Continental Beverage sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Elkhorn and Continental Beverage

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

The idea behind Elkhorn and Continental Beverage Brands 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.