Correlation Between E For and II Group

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

By analyzing existing cross correlation between E for L and II Group Public, you can compare the effects of market volatilities on E For and II Group 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 E For with a short position of II Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of E For and II Group.

Diversification Opportunities for E For and II Group

-0.42

Correlation Coefficient

E For  II Group

Very good diversification

The 3 months correlation between EFORL and IIG is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding E for L and II Group Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on II Group Public and E For 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 E for L are associated (or correlated) with II Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of II Group Public has no effect on the direction of E For i.e., E For and II Group go up and down completely randomly.

Pair Corralation between E For and II Group

Assuming the 90 days trading horizon E for L is expected to generate 1.48 times more return on investment than II Group. However, E For is 1.48 times more volatile than II Group Public. It trades about 0.21 of its potential returns per unit of risk. II Group Public is currently generating about 0.0 per unit of risk. If you would invest  13.00  in E for L on September 5, 2024 and sell it today you would earn a total of  15.00  from holding E for L or generate 115.38% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.41%
Values	Daily Returns

E for L  vs.  II Group Public

E for L

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in E for L are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak fundamental drivers, E For sustained solid returns over the last few months and may actually be approaching a breakup point.

II Group Public

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days II Group Public has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent technical and fundamental indicators, II Group is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with E For and II Group

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

The idea behind E for L and II Group Public 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.