Correlation Between Great Elm and B Riley

Can any of the company-specific risk be diversified away by investing in both Great Elm and B Riley 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 Great Elm and B Riley into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Great Elm Capital and B Riley Financial, you can compare the effects of market volatilities on Great Elm and B Riley 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 Great Elm with a short position of B Riley. Check out your portfolio center. Please also check ongoing floating volatility patterns of Great Elm and B Riley.

Diversification Opportunities for Great Elm and B Riley

0.68

Correlation Coefficient

Great Elm  B Riley

Poor diversification

The 3 months correlation between Great and RILYK is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Great Elm Capital and B Riley Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on B Riley Financial and Great Elm 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 Great Elm Capital are associated (or correlated) with B Riley. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of B Riley Financial has no effect on the direction of Great Elm i.e., Great Elm and B Riley go up and down completely randomly.

Pair Corralation between Great Elm and B Riley

Assuming the 90 days horizon Great Elm is expected to generate 41.1 times less return on investment than B Riley. But when comparing it to its historical volatility, Great Elm Capital is 19.9 times less risky than B Riley. It trades about 0.04 of its potential returns per unit of risk. B Riley Financial is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  1,727  in B Riley Financial on September 15, 2024 and sell it today you would earn a total of  238.00  from holding B Riley Financial or generate 13.78% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	32.81%
Values	Daily Returns

Great Elm Capital  vs.  B Riley Financial

Great Elm Capital

Risk-Adjusted Performance

0 of 100

Insignificant

Over the last 90 days Great Elm Capital has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy fundamental indicators, Great Elm is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

B Riley Financial

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in B Riley Financial are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite quite uncertain basic indicators, B Riley disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Great Elm and B Riley

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

The idea behind Great Elm Capital and B Riley Financial 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.