Correlation Between Great Elm and Great Elm

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

Diversification Opportunities for Great Elm and Great Elm

0.06

Correlation Coefficient

Great Elm  Great Elm

Significant diversification

The 3 months correlation between Great and Great is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Great Elm Capital and Great Elm Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Great Elm Group 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 Great Elm. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Great Elm Group has no effect on the direction of Great Elm i.e., Great Elm and Great Elm go up and down completely randomly.

Pair Corralation between Great Elm and Great Elm

Assuming the 90 days horizon Great Elm Capital is expected to under-perform the Great Elm. But the stock apears to be less risky and, when comparing its historical volatility, Great Elm Capital is 1.28 times less risky than Great Elm. The stock trades about 0.0 of its potential returns per unit of risk. The Great Elm Group is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  2,394  in Great Elm Group on December 4, 2024 and sell it today you would earn a total of  6.00  from holding Great Elm Group or generate 0.25% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.24%
Values	Daily Returns

Great Elm Capital  vs.  Great Elm Group

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.

Great Elm Group

Risk-Adjusted Performance

Very Weak

Over the last 90 days Great Elm Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent technical and fundamental indicators, Great Elm is not utilizing all of its potentials. The recent stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Great Elm and Great Elm

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

The idea behind Great Elm Capital and Great Elm Group 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.