Correlation Between Elco and EN Shoham

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

By analyzing existing cross correlation between Elco and EN Shoham Business, you can compare the effects of market volatilities on Elco and EN Shoham 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 EN Shoham. Check out your portfolio center. Please also check ongoing floating volatility patterns of Elco and EN Shoham.

Diversification Opportunities for Elco and EN Shoham

0.97

Correlation Coefficient

Elco  EN Shoham

Almost no diversification

The 3 months correlation between Elco and SHOM is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Elco and EN Shoham Business in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EN Shoham Business 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 EN Shoham. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EN Shoham Business has no effect on the direction of Elco i.e., Elco and EN Shoham go up and down completely randomly.

Pair Corralation between Elco and EN Shoham

Assuming the 90 days trading horizon Elco is expected to generate 2.72 times less return on investment than EN Shoham. But when comparing it to its historical volatility, Elco is 1.44 times less risky than EN Shoham. It trades about 0.21 of its potential returns per unit of risk. EN Shoham Business is currently generating about 0.4 of returns per unit of risk over similar time horizon. If you would invest  76,880  in EN Shoham Business on October 9, 2024 and sell it today you would earn a total of  12,850  from holding EN Shoham Business or generate 16.71% return on investment over 90 days.

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

Elco  vs.  EN Shoham Business

Elco

Risk-Adjusted Performance

39 of 100

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Elco are ranked lower than 39 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Elco sustained solid returns over the last few months and may actually be approaching a breakup point.

EN Shoham Business

Risk-Adjusted Performance

39 of 100

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in EN Shoham Business are ranked lower than 39 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, EN Shoham sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Elco and EN Shoham

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

The idea behind Elco and EN Shoham Business 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 Stocks Directory module to find actively traded stocks across global markets.