Correlation Between Great Elm and Sapiens International

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

Diversification Opportunities for Great Elm and Sapiens International

0.46

Correlation Coefficient

Great Elm  Sapiens International

Very weak diversification

The 3 months correlation between Great and Sapiens is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Great Elm Capital and Sapiens International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sapiens International 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 Sapiens International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sapiens International has no effect on the direction of Great Elm i.e., Great Elm and Sapiens International go up and down completely randomly.

Pair Corralation between Great Elm and Sapiens International

Assuming the 90 days horizon Great Elm Capital is expected to generate 0.13 times more return on investment than Sapiens International. However, Great Elm Capital is 7.98 times less risky than Sapiens International. It trades about 0.17 of its potential returns per unit of risk. Sapiens International is currently generating about 0.0 per unit of risk. If you would invest  2,461  in Great Elm Capital on December 26, 2024 and sell it today you would earn a total of  49.00  from holding Great Elm Capital or generate 1.99% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.33%
Values	Daily Returns

Great Elm Capital  vs.  Sapiens International

Great Elm Capital

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Great Elm Capital are ranked lower than 13 (%) 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.

Sapiens International

Risk-Adjusted Performance

Very Weak

Over the last 90 days Sapiens International has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Sapiens International is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Great Elm and Sapiens International

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

The idea behind Great Elm Capital and Sapiens 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.