Correlation Between Elcora Advanced and PHN Multi

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

By analyzing existing cross correlation between Elcora Advanced Materials and PHN Multi Style All Cap, you can compare the effects of market volatilities on Elcora Advanced and PHN Multi 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 Elcora Advanced with a short position of PHN Multi. Check out your portfolio center. Please also check ongoing floating volatility patterns of Elcora Advanced and PHN Multi.

Diversification Opportunities for Elcora Advanced and PHN Multi

-0.05

Correlation Coefficient

Elcora Advanced  PHN Multi

Good diversification

The 3 months correlation between Elcora and PHN is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Elcora Advanced Materials and PHN Multi Style All Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PHN Multi Style and Elcora Advanced 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 Elcora Advanced Materials are associated (or correlated) with PHN Multi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PHN Multi Style has no effect on the direction of Elcora Advanced i.e., Elcora Advanced and PHN Multi go up and down completely randomly.

Pair Corralation between Elcora Advanced and PHN Multi

Assuming the 90 days horizon Elcora Advanced Materials is expected to generate 11.44 times more return on investment than PHN Multi. However, Elcora Advanced is 11.44 times more volatile than PHN Multi Style All Cap. It trades about 0.03 of its potential returns per unit of risk. PHN Multi Style All Cap is currently generating about 0.07 per unit of risk. If you would invest  4.50  in Elcora Advanced Materials on October 21, 2024 and sell it today you would lose (2.70) from holding Elcora Advanced Materials or give up 60.0% of portfolio value over 90 days.

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

Elcora Advanced Materials  vs.  PHN Multi Style All Cap

Elcora Advanced Materials

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Elcora Advanced Materials are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Elcora Advanced showed solid returns over the last few months and may actually be approaching a breakup point.

PHN Multi Style

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PHN Multi Style All Cap has generated negative risk-adjusted returns adding no value to fund investors. In spite of very healthy basic indicators, PHN Multi is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Elcora Advanced and PHN Multi

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

The idea behind Elcora Advanced Materials and PHN Multi Style All Cap 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.