Correlation Between E For and More Return

Can any of the company-specific risk be diversified away by investing in both E For and More Return 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 More Return 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 More Return Public, you can compare the effects of market volatilities on E For and More Return 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 More Return. Check out your portfolio center. Please also check ongoing floating volatility patterns of E For and More Return.

Diversification Opportunities for E For and More Return

-0.68

Correlation Coefficient

E For  More Return

Excellent diversification

The 3 months correlation between EFORL and More is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding E for L and More Return Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on More Return 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 More Return. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of More Return Public has no effect on the direction of E For i.e., E For and More Return go up and down completely randomly.

Pair Corralation between E For and More Return

Assuming the 90 days trading horizon E for L is expected to generate 0.4 times more return on investment than More Return. However, E for L is 2.53 times less risky than More Return. It trades about 0.24 of its potential returns per unit of risk. More Return Public is currently generating about 0.01 per unit of risk. If you would invest  12.00  in E for L on October 7, 2024 and sell it today you would earn a total of  15.00  from holding E for L or generate 125.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

E for L  vs.  More Return Public

E for L

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in E for L are ranked lower than 18 (%) 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.

More Return Public

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days More Return Public has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite weak forward-looking signals, More Return may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with E For and More Return

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

The idea behind E for L and More Return 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.

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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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.