Correlation Between E L and Tilray

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

Diversification Opportunities for E L and Tilray

0.39

Correlation Coefficient

E L  Tilray

Weak diversification

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

Pair Corralation between E L and Tilray

Assuming the 90 days trading horizon E L Financial 3 is expected to generate 0.13 times more return on investment than Tilray. However, E L Financial 3 is 7.49 times less risky than Tilray. It trades about -0.04 of its potential returns per unit of risk. Tilray Inc is currently generating about -0.1 per unit of risk. If you would invest  2,327  in E L Financial 3 on October 23, 2024 and sell it today you would lose (37.00) from holding E L Financial 3 or give up 1.59% of portfolio value over 90 days.

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

E L Financial 3  vs.  Tilray Inc

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.

Tilray Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tilray Inc 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 E L and Tilray

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

The idea behind E L Financial 3 and Tilray Inc 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.