Correlation Between E L and Queens Road

Can any of the company-specific risk be diversified away by investing in both E L and Queens Road 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 Queens Road 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 Queens Road Capital, you can compare the effects of market volatilities on E L and Queens Road 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 Queens Road. Check out your portfolio center. Please also check ongoing floating volatility patterns of E L and Queens Road.

Diversification Opportunities for E L and Queens Road

-0.39

Correlation Coefficient

E L  Queens Road

Very good diversification

The 3 months correlation between ELF-PH and Queens is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding E L Financial 3 and Queens Road Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Queens Road Capital 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 Queens Road. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Queens Road Capital has no effect on the direction of E L i.e., E L and Queens Road go up and down completely randomly.

Pair Corralation between E L and Queens Road

Assuming the 90 days trading horizon E L Financial 3 is expected to generate 0.12 times more return on investment than Queens Road. However, E L Financial 3 is 8.04 times less risky than Queens Road. It trades about 0.19 of its potential returns per unit of risk. Queens Road Capital is currently generating about -0.03 per unit of risk. If you would invest  2,251  in E L Financial 3 on December 30, 2024 and sell it today you would earn a total of  90.00  from holding E L Financial 3 or generate 4.0% return on investment over 90 days.

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

E L Financial 3  vs.  Queens Road Capital

E L Financial

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in E L Financial 3 are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong technical and fundamental indicators, E L is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Queens Road Capital

Risk-Adjusted Performance

Very Weak

Over the last 90 days Queens Road Capital has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy fundamental indicators, Queens Road is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with E L and Queens Road

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

The idea behind E L Financial 3 and Queens Road Capital 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.