Correlation Between E L and Canadian General

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

By analyzing existing cross correlation between E L Financial Corp and Canadian General Investments, you can compare the effects of market volatilities on E L and Canadian General 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 Canadian General. Check out your portfolio center. Please also check ongoing floating volatility patterns of E L and Canadian General.

Diversification Opportunities for E L and Canadian General

-0.32

Correlation Coefficient

E L  Canadian General

Very good diversification

The 3 months correlation between ELF and Canadian is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding E L Financial Corp and Canadian General Investments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Canadian General Inv 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 Corp are associated (or correlated) with Canadian General. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Canadian General Inv has no effect on the direction of E L i.e., E L and Canadian General go up and down completely randomly.

Pair Corralation between E L and Canadian General

Assuming the 90 days trading horizon E L Financial Corp is expected to generate 1.97 times more return on investment than Canadian General. However, E L is 1.97 times more volatile than Canadian General Investments. It trades about 0.3 of its potential returns per unit of risk. Canadian General Investments is currently generating about -0.12 per unit of risk. If you would invest  128,859  in E L Financial Corp on December 4, 2024 and sell it today you would earn a total of  15,166  from holding E L Financial Corp or generate 11.77% 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 Corp  vs.  Canadian General Investments

E L Financial

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in E L Financial Corp are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating technical and fundamental indicators, E L may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Canadian General Inv

Risk-Adjusted Performance

Very Weak

Over the last 90 days Canadian General Investments has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's forward indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with E L and Canadian General

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

The idea behind E L Financial Corp and Canadian General Investments 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.