Correlation Between Elmera Group and ECIT AS

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

By analyzing existing cross correlation between Elmera Group ASA and ECIT AS, you can compare the effects of market volatilities on Elmera Group and ECIT AS 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 Elmera Group with a short position of ECIT AS. Check out your portfolio center. Please also check ongoing floating volatility patterns of Elmera Group and ECIT AS.

Diversification Opportunities for Elmera Group and ECIT AS

0.32

Correlation Coefficient

Elmera Group  ECIT AS

Weak diversification

The 3 months correlation between Elmera and ECIT is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Elmera Group ASA and ECIT AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ECIT AS and Elmera Group 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 Elmera Group ASA are associated (or correlated) with ECIT AS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ECIT AS has no effect on the direction of Elmera Group i.e., Elmera Group and ECIT AS go up and down completely randomly.

Pair Corralation between Elmera Group and ECIT AS

Assuming the 90 days trading horizon Elmera Group ASA is expected to generate 2.24 times more return on investment than ECIT AS. However, Elmera Group is 2.24 times more volatile than ECIT AS. It trades about 0.18 of its potential returns per unit of risk. ECIT AS is currently generating about 0.01 per unit of risk. If you would invest  3,235  in Elmera Group ASA on September 5, 2024 and sell it today you would earn a total of  735.00  from holding Elmera Group ASA or generate 22.72% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	92.31%
Values	Daily Returns

Elmera Group ASA  vs.  ECIT AS

Elmera Group ASA

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Elmera Group ASA are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of very conflicting basic indicators, Elmera Group displayed solid returns over the last few months and may actually be approaching a breakup point.

ECIT AS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ECIT AS has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent essential indicators, ECIT AS is not utilizing all of its potentials. The recent stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Elmera Group and ECIT AS

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

The idea behind Elmera Group ASA and ECIT AS 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.