Correlation Between E L and Quipt Home

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

Diversification Opportunities for E L and Quipt Home

-0.51

Correlation Coefficient

E L  Quipt Home

Excellent diversification

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

Pair Corralation between E L and Quipt Home

Assuming the 90 days trading horizon E L Financial Corp is expected to generate 0.76 times more return on investment than Quipt Home. However, E L Financial Corp is 1.32 times less risky than Quipt Home. It trades about 0.07 of its potential returns per unit of risk. Quipt Home Medical is currently generating about -0.07 per unit of risk. If you would invest  118,581  in E L Financial Corp on December 29, 2024 and sell it today you would earn a total of  13,013  from holding E L Financial Corp or generate 10.97% return on investment over 90 days.

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

E L Financial Corp  vs.  Quipt Home Medical

E L Financial

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in E L Financial Corp are ranked lower than 5 (%) 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.

Quipt Home Medical

Risk-Adjusted Performance

Very Weak

Over the last 90 days Quipt Home Medical has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with E L and Quipt Home

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

The idea behind E L Financial Corp and Quipt Home Medical 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.