Correlation Between E Home and El Pollo

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

By analyzing existing cross correlation between E Home Household Service and El Pollo Loco, you can compare the effects of market volatilities on E Home and El Pollo 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 Home with a short position of El Pollo. Check out your portfolio center. Please also check ongoing floating volatility patterns of E Home and El Pollo.

Diversification Opportunities for E Home and El Pollo

0.68

Correlation Coefficient

E Home  El Pollo

Poor diversification

The 3 months correlation between EJH and LOCO is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding E Home Household Service and El Pollo Loco in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on El Pollo Loco and E Home 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 Home Household Service are associated (or correlated) with El Pollo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of El Pollo Loco has no effect on the direction of E Home i.e., E Home and El Pollo go up and down completely randomly.

Pair Corralation between E Home and El Pollo

Considering the 90-day investment horizon E Home Household Service is expected to generate 5.28 times more return on investment than El Pollo. However, E Home is 5.28 times more volatile than El Pollo Loco. It trades about 0.08 of its potential returns per unit of risk. El Pollo Loco is currently generating about -0.12 per unit of risk. If you would invest  73.00  in E Home Household Service on October 7, 2024 and sell it today you would earn a total of  5.00  from holding E Home Household Service or generate 6.85% return on investment over 90 days.

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

E Home Household Service  vs.  El Pollo Loco

E Home Household

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days E Home Household Service has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's forward-looking indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

El Pollo Loco

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days El Pollo Loco has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's fundamental indicators remain very healthy which may send shares a bit higher in February 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with E Home and El Pollo

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

The idea behind E Home Household Service and El Pollo Loco 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.