Correlation Between Great Elm and Old Republic

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

Diversification Opportunities for Great Elm and Old Republic

0.58

Correlation Coefficient

Great Elm  Old Republic

Very weak diversification

The 3 months correlation between Great and Old is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Great Elm Capital and Old Republic International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Old Republic Interna 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 Old Republic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Old Republic Interna has no effect on the direction of Great Elm i.e., Great Elm and Old Republic go up and down completely randomly.

Pair Corralation between Great Elm and Old Republic

Assuming the 90 days horizon Great Elm is expected to generate 2.78 times less return on investment than Old Republic. But when comparing it to its historical volatility, Great Elm Capital is 3.81 times less risky than Old Republic. It trades about 0.15 of its potential returns per unit of risk. Old Republic International is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  2,846  in Old Republic International on September 4, 2024 and sell it today you would earn a total of  997.00  from holding Old Republic International or generate 35.03% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.95%
Values	Daily Returns

Great Elm Capital  vs.  Old Republic International

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.

Old Republic Interna

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Old Republic International are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak basic indicators, Old Republic may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Great Elm and Old Republic

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

The idea behind Great Elm Capital and Old Republic International 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.