Correlation Between Element Fleet and Emera Pref

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Can any of the company-specific risk be diversified away by investing in both Element Fleet and Emera Pref 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 Emera Pref 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 Emera Pref A, you can compare the effects of market volatilities on Element Fleet and Emera Pref 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 Emera Pref. Check out your portfolio center. Please also check ongoing floating volatility patterns of Element Fleet and Emera Pref.

Diversification Opportunities for Element Fleet and Emera Pref

0.38
  Correlation Coefficient

Weak diversification

The 3 months correlation between Element and Emera is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Element Fleet Management and Emera Pref A in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Emera Pref A 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 Emera Pref. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Emera Pref A has no effect on the direction of Element Fleet i.e., Element Fleet and Emera Pref go up and down completely randomly.

Pair Corralation between Element Fleet and Emera Pref

Assuming the 90 days trading horizon Element Fleet Management is expected to under-perform the Emera Pref. In addition to that, Element Fleet is 1.21 times more volatile than Emera Pref A. It trades about -0.1 of its total potential returns per unit of risk. Emera Pref A is currently generating about 0.07 per unit of volatility. If you would invest  1,596  in Emera Pref A on September 28, 2024 and sell it today you would earn a total of  19.00  from holding Emera Pref A or generate 1.19% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy95.45%
ValuesDaily Returns

Element Fleet Management  vs.  Emera Pref A

 Performance 
       Timeline  
Element Fleet Management 

Risk-Adjusted Performance

1 of 100

 
Weak
 
Strong
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in Element Fleet Management are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. 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.
Emera Pref A 

Risk-Adjusted Performance

16 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Emera Pref A are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite somewhat abnormal basic indicators, Emera Pref may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Element Fleet and Emera Pref Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Element Fleet and Emera Pref

The main advantage of trading using opposite Element Fleet and Emera Pref positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Element Fleet position performs unexpectedly, Emera Pref 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 Emera Pref will offset losses from the drop in Emera Pref's long position.
The idea behind Element Fleet Management and Emera Pref A 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.

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