Correlation Between E L and Dividend

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

By analyzing existing cross correlation between E L Financial 3 and Dividend 15 Split, you can compare the effects of market volatilities on E L and Dividend 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 L with a short position of Dividend. Check out your portfolio center. Please also check ongoing floating volatility patterns of E L and Dividend.

Diversification Opportunities for E L and Dividend

-0.66

Correlation Coefficient

E L  Dividend

Excellent diversification

The 3 months correlation between ELF-PH and Dividend is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding E L Financial 3 and Dividend 15 Split in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dividend 15 Split and E L 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 L Financial 3 are associated (or correlated) with Dividend. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dividend 15 Split has no effect on the direction of E L i.e., E L and Dividend go up and down completely randomly.

Pair Corralation between E L and Dividend

Assuming the 90 days trading horizon E L Financial 3 is expected to generate 0.36 times more return on investment than Dividend. However, E L Financial 3 is 2.77 times less risky than Dividend. It trades about 0.21 of its potential returns per unit of risk. Dividend 15 Split is currently generating about -0.08 per unit of risk. If you would invest  2,230  in E L Financial 3 on October 1, 2024 and sell it today you would earn a total of  50.00  from holding E L Financial 3 or generate 2.24% return on investment over 90 days.

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

E L Financial 3  vs.  Dividend 15 Split

E L Financial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days E L Financial 3 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong technical and fundamental indicators, E L is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Dividend 15 Split

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Dividend 15 Split are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Dividend may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with E L and Dividend

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

The idea behind E L Financial 3 and Dividend 15 Split 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.