Correlation Between Element Fleet and Earth Alive

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

By analyzing existing cross correlation between Element Fleet Management and Earth Alive Clean, you can compare the effects of market volatilities on Element Fleet and Earth Alive 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 Element Fleet with a short position of Earth Alive. Check out your portfolio center. Please also check ongoing floating volatility patterns of Element Fleet and Earth Alive.

Diversification Opportunities for Element Fleet and Earth Alive

0.0

Correlation Coefficient

Element Fleet  Earth Alive

Pay attention - limited upside

The 3 months correlation between Element and Earth is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Element Fleet Management and Earth Alive Clean in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Earth Alive Clean and Element Fleet 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 Element Fleet Management are associated (or correlated) with Earth Alive. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Earth Alive Clean has no effect on the direction of Element Fleet i.e., Element Fleet and Earth Alive go up and down completely randomly.

Pair Corralation between Element Fleet and Earth Alive

Assuming the 90 days trading horizon Element Fleet is expected to generate 7.88 times less return on investment than Earth Alive. But when comparing it to its historical volatility, Element Fleet Management is 11.49 times less risky than Earth Alive. It trades about 0.08 of its potential returns per unit of risk. Earth Alive Clean is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  2.00  in Earth Alive Clean on October 23, 2024 and sell it today you would lose (1.50) from holding Earth Alive Clean or give up 75.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Element Fleet Management  vs.  Earth Alive Clean

Element Fleet Management

Risk-Adjusted Performance

0 of 100

Very Weak

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

Earth Alive Clean

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Earth Alive Clean has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Earth Alive is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Element Fleet and Earth Alive

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

The idea behind Element Fleet Management and Earth Alive Clean 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.