Correlation Between Element Solutions and Core Molding

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

By analyzing existing cross correlation between Element Solutions and Core Molding Technologies, you can compare the effects of market volatilities on Element Solutions and Core Molding 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 Element Solutions with a short position of Core Molding. Check out your portfolio center. Please also check ongoing floating volatility patterns of Element Solutions and Core Molding.

Diversification Opportunities for Element Solutions and Core Molding

-0.15

Correlation Coefficient

Element Solutions  Core Molding

Good diversification

The 3 months correlation between Element and Core is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Element Solutions and Core Molding Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Core Molding Technologies and Element Solutions 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 Element Solutions are associated (or correlated) with Core Molding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Core Molding Technologies has no effect on the direction of Element Solutions i.e., Element Solutions and Core Molding go up and down completely randomly.

Pair Corralation between Element Solutions and Core Molding

Considering the 90-day investment horizon Element Solutions is expected to generate 0.73 times more return on investment than Core Molding. However, Element Solutions is 1.38 times less risky than Core Molding. It trades about -0.03 of its potential returns per unit of risk. Core Molding Technologies is currently generating about -0.07 per unit of risk. If you would invest  2,552  in Element Solutions on December 27, 2024 and sell it today you would lose (81.00) from holding Element Solutions or give up 3.17% of portfolio value over 90 days.

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

Element Solutions  vs.  Core Molding Technologies

Element Solutions

Risk-Adjusted Performance

Very Weak

Over the last 90 days Element Solutions has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, Element Solutions is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Core Molding Technologies

Risk-Adjusted Performance

Very Weak

Over the last 90 days Core Molding Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's primary indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Element Solutions and Core Molding

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

The idea behind Element Solutions and Core Molding Technologies 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.