Correlation Between E M and Citrus Leisure

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

Diversification Opportunities for E M and Citrus Leisure

0.23

Correlation Coefficient

E M  Citrus Leisure

Modest diversification

The 3 months correlation between EMLN0000 and Citrus is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding E M L and Citrus Leisure PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Citrus Leisure 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 Citrus Leisure. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Citrus Leisure PLC has no effect on the direction of E M i.e., E M and Citrus Leisure go up and down completely randomly.

Pair Corralation between E M and Citrus Leisure

Assuming the 90 days trading horizon E M L is expected to generate 2.87 times more return on investment than Citrus Leisure. However, E M is 2.87 times more volatile than Citrus Leisure PLC. It trades about 0.1 of its potential returns per unit of risk. Citrus Leisure PLC is currently generating about -0.12 per unit of risk. If you would invest  360.00  in E M L on October 9, 2024 and sell it today you would earn a total of  30.00  from holding E M L or generate 8.33% return on investment over 90 days.

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

E M L  vs.  Citrus Leisure PLC

E M L

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in E M L are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, E M sustained solid returns over the last few months and may actually be approaching a breakup point.

Citrus Leisure PLC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Citrus Leisure PLC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with E M and Citrus Leisure

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

The idea behind E M L and Citrus Leisure 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.