Correlation Between E M and Chemanex PLC

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

By analyzing existing cross correlation between E M L and Chemanex PLC, you can compare the effects of market volatilities on E M and Chemanex 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 E M with a short position of Chemanex PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of E M and Chemanex PLC.

Diversification Opportunities for E M and Chemanex PLC

0.0

Correlation Coefficient

E M  Chemanex PLC

Pay attention - limited upside

The 3 months correlation between EMLN0000 and Chemanex is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding E M L and Chemanex PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chemanex PLC and E M 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 M L are associated (or correlated) with Chemanex PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chemanex PLC has no effect on the direction of E M i.e., E M and Chemanex PLC go up and down completely randomly.

Pair Corralation between E M and Chemanex PLC

If you would invest  8,000  in Chemanex PLC on October 7, 2024 and sell it today you would earn a total of  10,475  from holding Chemanex PLC or generate 130.94% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

E M L  vs.  Chemanex PLC

E M L

Risk-Adjusted Performance

0 of 100

OK

Over the last 90 days E M L has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, E M is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Chemanex PLC

Risk-Adjusted Performance

27 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Chemanex PLC are ranked lower than 27 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Chemanex PLC sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with E M and Chemanex PLC

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

The idea behind E M L and Chemanex 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.

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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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.