Correlation Between E L and TDb Split

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

Diversification Opportunities for E L and TDb Split

0.45

Correlation Coefficient

E L  TDb Split

Very weak diversification

The 3 months correlation between ELF-PH and TDb is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding E L Financial 3 and TDb Split Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TDb Split Corp 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 TDb Split. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TDb Split Corp has no effect on the direction of E L i.e., E L and TDb Split go up and down completely randomly.

Pair Corralation between E L and TDb Split

Assuming the 90 days trading horizon E L is expected to generate 5.32 times less return on investment than TDb Split. But when comparing it to its historical volatility, E L Financial 3 is 9.0 times less risky than TDb Split. It trades about 0.19 of its potential returns per unit of risk. TDb Split Corp is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  307.00  in TDb Split Corp on December 29, 2024 and sell it today you would earn a total of  62.00  from holding TDb Split Corp or generate 20.2% return on investment over 90 days.

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

E L Financial 3  vs.  TDb Split Corp

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.

TDb Split Corp

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in TDb Split Corp are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating fundamental indicators, TDb Split displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with E L and TDb Split

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

The idea behind E L Financial 3 and TDb Split Corp 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.