Correlation Between Elcom Technology and Riverway Management

Can any of the company-specific risk be diversified away by investing in both Elcom Technology and Riverway Management 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 Elcom Technology and Riverway Management into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Elcom Technology Communications and Riverway Management JSC, you can compare the effects of market volatilities on Elcom Technology and Riverway Management 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 Elcom Technology with a short position of Riverway Management. Check out your portfolio center. Please also check ongoing floating volatility patterns of Elcom Technology and Riverway Management.

Diversification Opportunities for Elcom Technology and Riverway Management

-0.56

Correlation Coefficient

Elcom Technology  Riverway Management

Excellent diversification

The 3 months correlation between Elcom and Riverway is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding Elcom Technology Communication and Riverway Management JSC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Riverway Management JSC and Elcom Technology 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 Elcom Technology Communications are associated (or correlated) with Riverway Management. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Riverway Management JSC has no effect on the direction of Elcom Technology i.e., Elcom Technology and Riverway Management go up and down completely randomly.

Pair Corralation between Elcom Technology and Riverway Management

Assuming the 90 days trading horizon Elcom Technology Communications is expected to generate 0.6 times more return on investment than Riverway Management. However, Elcom Technology Communications is 1.67 times less risky than Riverway Management. It trades about 0.12 of its potential returns per unit of risk. Riverway Management JSC is currently generating about -0.08 per unit of risk. If you would invest  2,470,000  in Elcom Technology Communications on October 20, 2024 and sell it today you would earn a total of  315,000  from holding Elcom Technology Communications or generate 12.75% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	81.25%
Values	Daily Returns

Elcom Technology Communication  vs.  Riverway Management JSC

Elcom Technology Com

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Elcom Technology Communications are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating fundamental indicators, Elcom Technology displayed solid returns over the last few months and may actually be approaching a breakup point.

Riverway Management JSC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Riverway Management JSC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic 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 Elcom Technology and Riverway Management

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

The idea behind Elcom Technology Communications and Riverway Management JSC 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.