Correlation Between E M and Madulsima Plantations

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

Diversification Opportunities for E M and Madulsima Plantations

0.8

Correlation Coefficient

E M  Madulsima Plantations

Very poor diversification

The 3 months correlation between EMLN0000 and Madulsima is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding E M L and Madulsima Plantations PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Madulsima Plantations 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 Madulsima Plantations. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Madulsima Plantations PLC has no effect on the direction of E M i.e., E M and Madulsima Plantations go up and down completely randomly.

Pair Corralation between E M and Madulsima Plantations

Assuming the 90 days trading horizon E M L is expected to generate 1.07 times more return on investment than Madulsima Plantations. However, E M is 1.07 times more volatile than Madulsima Plantations PLC. It trades about -0.06 of its potential returns per unit of risk. Madulsima Plantations PLC is currently generating about -0.07 per unit of risk. If you would invest  420.00  in E M L on December 28, 2024 and sell it today you would lose (50.00) from holding E M L or give up 11.9% of portfolio value over 90 days.

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

E M L  vs.  Madulsima Plantations PLC

E M L

Risk-Adjusted Performance

Very Weak

Over the last 90 days E M L has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Madulsima Plantations PLC

Risk-Adjusted Performance

Very Weak

Over the last 90 days Madulsima Plantations PLC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with E M and Madulsima Plantations

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

The idea behind E M L and Madulsima Plantations 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.