Correlation Between Great Elm and National Rural

Can any of the company-specific risk be diversified away by investing in both Great Elm and National Rural 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 National Rural into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Great Elm Group and National Rural Utilities, you can compare the effects of market volatilities on Great Elm and National Rural 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 National Rural. Check out your portfolio center. Please also check ongoing floating volatility patterns of Great Elm and National Rural.

Diversification Opportunities for Great Elm and National Rural

-0.34

Correlation Coefficient

Great Elm  National Rural

Very good diversification

The 3 months correlation between Great and National is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Great Elm Group and National Rural Utilities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on National Rural Utilities 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 Group are associated (or correlated) with National Rural. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of National Rural Utilities has no effect on the direction of Great Elm i.e., Great Elm and National Rural go up and down completely randomly.

Pair Corralation between Great Elm and National Rural

Assuming the 90 days horizon Great Elm Group is expected to generate 1.65 times more return on investment than National Rural. However, Great Elm is 1.65 times more volatile than National Rural Utilities. It trades about 0.05 of its potential returns per unit of risk. National Rural Utilities is currently generating about -0.07 per unit of risk. If you would invest  2,339  in Great Elm Group on September 13, 2024 and sell it today you would earn a total of  77.00  from holding Great Elm Group or generate 3.29% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Great Elm Group  vs.  National Rural Utilities

Great Elm Group

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Great Elm Group are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent technical and fundamental indicators, Great Elm is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

National Rural Utilities

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days National Rural Utilities has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, National Rural is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Great Elm and National Rural

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

The idea behind Great Elm Group and National Rural Utilities 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.