Correlation Between Elco and Accel Solutions

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

By analyzing existing cross correlation between Elco and Accel Solutions Group, you can compare the effects of market volatilities on Elco and Accel Solutions 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 Elco with a short position of Accel Solutions. Check out your portfolio center. Please also check ongoing floating volatility patterns of Elco and Accel Solutions.

Diversification Opportunities for Elco and Accel Solutions

0.5

Correlation Coefficient

Elco  Accel Solutions

Very weak diversification

The 3 months correlation between Elco and Accel is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Elco and Accel Solutions Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Accel Solutions Group and Elco 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 Elco are associated (or correlated) with Accel Solutions. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Accel Solutions Group has no effect on the direction of Elco i.e., Elco and Accel Solutions go up and down completely randomly.

Pair Corralation between Elco and Accel Solutions

Assuming the 90 days trading horizon Elco is expected to under-perform the Accel Solutions. But the stock apears to be less risky and, when comparing its historical volatility, Elco is 1.77 times less risky than Accel Solutions. The stock trades about -0.02 of its potential returns per unit of risk. The Accel Solutions Group is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  13,430  in Accel Solutions Group on December 30, 2024 and sell it today you would earn a total of  4,630  from holding Accel Solutions Group or generate 34.48% return on investment over 90 days.

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

Elco  vs.  Accel Solutions Group

Elco

Risk-Adjusted Performance

Very Weak

Over the last 90 days Elco has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Elco is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Accel Solutions Group

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Accel Solutions Group are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Accel Solutions sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Elco and Accel Solutions

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

The idea behind Elco and Accel Solutions Group 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.