Correlation Between E L and Innergex Renewable

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

Diversification Opportunities for E L and Innergex Renewable

-0.51

Correlation Coefficient

E L  Innergex Renewable

Excellent diversification

The 3 months correlation between ELF and Innergex is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding E L Financial Corp and Innergex Renewable Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Innergex Renewable Energy 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 Innergex Renewable. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Innergex Renewable Energy has no effect on the direction of E L i.e., E L and Innergex Renewable go up and down completely randomly.

Pair Corralation between E L and Innergex Renewable

Assuming the 90 days trading horizon E L Financial Corp is expected to generate 1.33 times more return on investment than Innergex Renewable. However, E L is 1.33 times more volatile than Innergex Renewable Energy. It trades about 0.02 of its potential returns per unit of risk. Innergex Renewable Energy is currently generating about -0.07 per unit of risk. If you would invest  148,478  in E L Financial Corp on November 20, 2024 and sell it today you would earn a total of  1,722  from holding E L Financial Corp or generate 1.16% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	72.13%
Values	Daily Returns

E L Financial Corp  vs.  Innergex Renewable Energy

E L Financial

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in E L Financial Corp are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy technical and fundamental indicators, E L is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Innergex Renewable Energy

Risk-Adjusted Performance

Very Weak

Over the last 90 days Innergex Renewable Energy has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's technical and fundamental 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 Innergex Renewable

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

The idea behind E L Financial Corp and Innergex Renewable Energy 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.