Correlation Between High Liner and E Split

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

By analyzing existing cross correlation between High Liner Foods and E Split Corp, you can compare the effects of market volatilities on High Liner and E Split 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 High Liner with a short position of E Split. Check out your portfolio center. Please also check ongoing floating volatility patterns of High Liner and E Split.

Diversification Opportunities for High Liner and E Split

0.93

Correlation Coefficient

High Liner  E Split

Almost no diversification

The 3 months correlation between High and ENS-PA is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding High Liner Foods and E Split Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on E Split Corp and High Liner 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 High Liner Foods are associated (or correlated) with E Split. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of E Split Corp has no effect on the direction of High Liner i.e., High Liner and E Split go up and down completely randomly.

Pair Corralation between High Liner and E Split

Assuming the 90 days trading horizon High Liner Foods is expected to generate 1.41 times more return on investment than E Split. However, High Liner is 1.41 times more volatile than E Split Corp. It trades about 0.14 of its potential returns per unit of risk. E Split Corp is currently generating about -0.08 per unit of risk. If you would invest  1,516  in High Liner Foods on September 28, 2024 and sell it today you would earn a total of  49.00  from holding High Liner Foods or generate 3.23% return on investment over 90 days.

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

High Liner Foods  vs.  E Split Corp

High Liner Foods

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in High Liner Foods are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain technical and fundamental indicators, High Liner displayed solid returns over the last few months and may actually be approaching a breakup point.

E Split Corp

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in E Split Corp are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, E Split is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with High Liner and E Split

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

The idea behind High Liner Foods and E Split Corp 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.