Correlation Between Elin Electronics and REC

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

By analyzing existing cross correlation between Elin Electronics Limited and REC Limited, you can compare the effects of market volatilities on Elin Electronics and REC 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 Elin Electronics with a short position of REC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Elin Electronics and REC.

Diversification Opportunities for Elin Electronics and REC

0.59

Correlation Coefficient

Elin Electronics  REC

Very weak diversification

The 3 months correlation between Elin and REC is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Elin Electronics Limited and REC Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on REC Limited and Elin Electronics 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 Elin Electronics Limited are associated (or correlated) with REC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of REC Limited has no effect on the direction of Elin Electronics i.e., Elin Electronics and REC go up and down completely randomly.

Pair Corralation between Elin Electronics and REC

Assuming the 90 days trading horizon Elin Electronics Limited is expected to under-perform the REC. In addition to that, Elin Electronics is 1.28 times more volatile than REC Limited. It trades about -0.21 of its total potential returns per unit of risk. REC Limited is currently generating about -0.09 per unit of volatility. If you would invest  55,910  in REC Limited on October 7, 2024 and sell it today you would lose (2,105) from holding REC Limited or give up 3.76% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.24%
Values	Daily Returns

Elin Electronics Limited  vs.  REC Limited

Elin Electronics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Elin Electronics Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Elin Electronics is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

REC Limited

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in REC Limited are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unsteady essential indicators, REC may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Elin Electronics and REC

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

The idea behind Elin Electronics Limited and REC Limited 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.