Correlation Between Geodrill and Elcora Advanced

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

By analyzing existing cross correlation between Geodrill Limited and Elcora Advanced Materials, you can compare the effects of market volatilities on Geodrill and Elcora Advanced 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 Geodrill with a short position of Elcora Advanced. Check out your portfolio center. Please also check ongoing floating volatility patterns of Geodrill and Elcora Advanced.

Diversification Opportunities for Geodrill and Elcora Advanced

0.16

Correlation Coefficient

Geodrill  Elcora Advanced

Average diversification

The 3 months correlation between Geodrill and Elcora is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Geodrill Limited and Elcora Advanced Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Elcora Advanced Materials and Geodrill 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 Geodrill Limited are associated (or correlated) with Elcora Advanced. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Elcora Advanced Materials has no effect on the direction of Geodrill i.e., Geodrill and Elcora Advanced go up and down completely randomly.

Pair Corralation between Geodrill and Elcora Advanced

Assuming the 90 days horizon Geodrill is expected to generate 1.15 times less return on investment than Elcora Advanced. But when comparing it to its historical volatility, Geodrill Limited is 5.84 times less risky than Elcora Advanced. It trades about 0.03 of its potential returns per unit of risk. Elcora Advanced Materials is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  1.60  in Elcora Advanced Materials on September 3, 2024 and sell it today you would lose (0.40) from holding Elcora Advanced Materials or give up 25.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Geodrill Limited  vs.  Elcora Advanced Materials

Geodrill Limited

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Geodrill Limited are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable fundamental indicators, Geodrill is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Elcora Advanced Materials

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Elcora Advanced Materials has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Elcora Advanced is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Geodrill and Elcora Advanced

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

The idea behind Geodrill Limited and Elcora Advanced Materials 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.