Correlation Between Elcora Advanced and Niobay Metals

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

By analyzing existing cross correlation between Elcora Advanced Materials and Niobay Metals, you can compare the effects of market volatilities on Elcora Advanced and Niobay Metals 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 Elcora Advanced with a short position of Niobay Metals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Elcora Advanced and Niobay Metals.

Diversification Opportunities for Elcora Advanced and Niobay Metals

-0.11

Correlation Coefficient

Elcora Advanced  Niobay Metals

Good diversification

The 3 months correlation between Elcora and Niobay is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Elcora Advanced Materials and Niobay Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Niobay Metals and Elcora Advanced 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 Elcora Advanced Materials are associated (or correlated) with Niobay Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Niobay Metals has no effect on the direction of Elcora Advanced i.e., Elcora Advanced and Niobay Metals go up and down completely randomly.

Pair Corralation between Elcora Advanced and Niobay Metals

Assuming the 90 days horizon Elcora Advanced Materials is expected to generate 24.78 times more return on investment than Niobay Metals. However, Elcora Advanced is 24.78 times more volatile than Niobay Metals. It trades about 0.39 of its potential returns per unit of risk. Niobay Metals is currently generating about 0.1 per unit of risk. If you would invest  1.19  in Elcora Advanced Materials on December 26, 2024 and sell it today you would earn a total of  7.81  from holding Elcora Advanced Materials or generate 656.3% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	49.18%
Values	Daily Returns

Elcora Advanced Materials  vs.  Niobay Metals

Elcora Advanced Materials

Risk-Adjusted Performance

Strong

Over the last 90 days Elcora Advanced Materials has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly weak basic indicators, Elcora Advanced reported solid returns over the last few months and may actually be approaching a breakup point.

Niobay Metals

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Niobay Metals are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile fundamental indicators, Niobay Metals reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Elcora Advanced and Niobay Metals

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

The idea behind Elcora Advanced Materials and Niobay Metals 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.