Correlation Between E L and MCAN Mortgage

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

Diversification Opportunities for E L and MCAN Mortgage

0.85

Correlation Coefficient

E L  MCAN Mortgage

Very poor diversification

The 3 months correlation between ELF and MCAN is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding E L Financial Corp and MCAN Mortgage in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MCAN Mortgage 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 MCAN Mortgage. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MCAN Mortgage has no effect on the direction of E L i.e., E L and MCAN Mortgage go up and down completely randomly.

Pair Corralation between E L and MCAN Mortgage

Assuming the 90 days trading horizon E L Financial Corp is expected to generate 1.11 times more return on investment than MCAN Mortgage. However, E L is 1.11 times more volatile than MCAN Mortgage. It trades about 0.1 of its potential returns per unit of risk. MCAN Mortgage is currently generating about 0.1 per unit of risk. If you would invest  82,896  in E L Financial Corp on September 12, 2024 and sell it today you would earn a total of  56,504  from holding E L Financial Corp or generate 68.16% return on investment over 90 days.

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

E L Financial Corp  vs.  MCAN Mortgage

E L Financial

Risk-Adjusted Performance

6 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in E L Financial Corp are ranked lower than 6 (%) 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 January 2025.

MCAN Mortgage

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in MCAN Mortgage are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, MCAN Mortgage may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with E L and MCAN Mortgage

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

The idea behind E L Financial Corp and MCAN Mortgage 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.