Correlation Between Eltek and Porvair Plc

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

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

Diversification Opportunities for Eltek and Porvair Plc

0.22

Correlation Coefficient

Eltek  Porvair Plc

Modest diversification

The 3 months correlation between Eltek and Porvair is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Eltek and Porvair plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Porvair plc and Eltek 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 Eltek are associated (or correlated) with Porvair Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Porvair plc has no effect on the direction of Eltek i.e., Eltek and Porvair Plc go up and down completely randomly.

Pair Corralation between Eltek and Porvair Plc

Given the investment horizon of 90 days Eltek is expected to generate 2.9 times more return on investment than Porvair Plc. However, Eltek is 2.9 times more volatile than Porvair plc. It trades about 0.06 of its potential returns per unit of risk. Porvair plc is currently generating about 0.11 per unit of risk. If you would invest  945.00  in Eltek on September 29, 2024 and sell it today you would earn a total of  160.00  from holding Eltek or generate 16.93% return on investment over 90 days.

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

Eltek  vs.  Porvair plc

Eltek

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Eltek are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, Eltek is not utilizing all of its potentials. The newest stock price mess, may contribute to short-term losses for the institutional investors.

Porvair plc

Risk-Adjusted Performance

11 of 100

Good

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

Pair Trading with Eltek and Porvair Plc

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

The idea behind Eltek and Porvair plc 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.