Correlation Between E L and Scottie Resources

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

Diversification Opportunities for E L and Scottie Resources

0.36

Correlation Coefficient

E L  Scottie Resources

Weak diversification

The 3 months correlation between ELF and Scottie is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding E L Financial Corp and Scottie Resources Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Scottie Resources 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 Corp are associated (or correlated) with Scottie Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Scottie Resources Corp has no effect on the direction of E L i.e., E L and Scottie Resources go up and down completely randomly.

Pair Corralation between E L and Scottie Resources

Assuming the 90 days trading horizon E L Financial Corp is expected to generate 0.62 times more return on investment than Scottie Resources. However, E L Financial Corp is 1.61 times less risky than Scottie Resources. It trades about 0.07 of its potential returns per unit of risk. Scottie Resources Corp is currently generating about 0.04 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 Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

E L Financial Corp  vs.  Scottie Resources Corp

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.

Scottie Resources Corp

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Scottie Resources Corp are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Scottie Resources may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with E L and Scottie Resources

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

The idea behind E L Financial Corp and Scottie Resources 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.

Check out your portfolio center.

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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.