Correlation Between Great Elm and Data#3

Can any of the company-specific risk be diversified away by investing in both Great Elm and Data#3 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 Data#3 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 Data3 Limited, you can compare the effects of market volatilities on Great Elm and Data#3 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 Data#3. Check out your portfolio center. Please also check ongoing floating volatility patterns of Great Elm and Data#3.

Diversification Opportunities for Great Elm and Data#3

0.79

Correlation Coefficient

Great Elm  Data#3

Poor diversification

The 3 months correlation between Great and Data#3 is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Great Elm Capital and Data3 Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Data3 Limited 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 Data#3. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Data3 Limited has no effect on the direction of Great Elm i.e., Great Elm and Data#3 go up and down completely randomly.

Pair Corralation between Great Elm and Data#3

Assuming the 90 days horizon Great Elm is expected to generate 2.96 times less return on investment than Data#3. But when comparing it to its historical volatility, Great Elm Capital is 1.68 times less risky than Data#3. It trades about 0.1 of its potential returns per unit of risk. Data3 Limited is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  384.00  in Data3 Limited on September 4, 2024 and sell it today you would earn a total of  21.00  from holding Data3 Limited or generate 5.47% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	92.06%
Values	Daily Returns

Great Elm Capital  vs.  Data3 Limited

Great Elm Capital

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Great Elm Capital are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong fundamental indicators, Great Elm is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Data3 Limited

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Data3 Limited are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Data#3 is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Great Elm and Data#3

The main advantage of trading using opposite Great Elm and Data#3 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Great Elm position performs unexpectedly, Data#3 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 Data#3 will offset losses from the drop in Data#3's long position.

The idea behind Great Elm Capital and Data3 Limited 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.

Check out your portfolio center.

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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.