Correlation Between Great Elm and Equus Total

Can any of the company-specific risk be diversified away by investing in both Great Elm and Equus Total 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 Equus Total 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 Equus Total Return, you can compare the effects of market volatilities on Great Elm and Equus Total 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 Equus Total. Check out your portfolio center. Please also check ongoing floating volatility patterns of Great Elm and Equus Total.

Diversification Opportunities for Great Elm and Equus Total

0.29

Correlation Coefficient

Great Elm  Equus Total

Modest diversification

The 3 months correlation between Great and Equus is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Great Elm Capital and Equus Total Return in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Equus Total Return 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 Equus Total. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Equus Total Return has no effect on the direction of Great Elm i.e., Great Elm and Equus Total go up and down completely randomly.

Pair Corralation between Great Elm and Equus Total

Assuming the 90 days horizon Great Elm is expected to generate 7.35 times less return on investment than Equus Total. But when comparing it to its historical volatility, Great Elm Capital is 8.99 times less risky than Equus Total. It trades about 0.08 of its potential returns per unit of risk. Equus Total Return is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  120.00  in Equus Total Return on November 28, 2024 and sell it today you would earn a total of  15.00  from holding Equus Total Return or generate 12.5% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.31%
Values	Daily Returns

Great Elm Capital  vs.  Equus Total Return

Great Elm Capital

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Great Elm Capital are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. 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.

Equus Total Return

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Equus Total Return are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Equus Total unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Great Elm and Equus Total

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

The idea behind Great Elm Capital and Equus Total Return 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.