Correlation Between IA Financial and E L

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

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

Diversification Opportunities for IA Financial and E L

0.72

Correlation Coefficient

IA Financial  E L

Poor diversification

The 3 months correlation between IAG and ELF is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding iA Financial and E L Financial Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on E L Financial and IA Financial 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 iA Financial are associated (or correlated) with E L. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of E L Financial has no effect on the direction of IA Financial i.e., IA Financial and E L go up and down completely randomly.

Pair Corralation between IA Financial and E L

Assuming the 90 days trading horizon iA Financial is expected to generate 1.24 times more return on investment than E L. However, IA Financial is 1.24 times more volatile than E L Financial Corp. It trades about 0.09 of its potential returns per unit of risk. E L Financial Corp is currently generating about 0.09 per unit of risk. If you would invest  7,471  in iA Financial on October 4, 2024 and sell it today you would earn a total of  5,685  from holding iA Financial or generate 76.09% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.6%
Values	Daily Returns

iA Financial  vs.  E L Financial Corp

iA Financial

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in iA Financial are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating technical and fundamental indicators, IA Financial displayed solid returns over the last few months and may actually be approaching a breakup point.

E L Financial

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in E L Financial Corp are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy technical and fundamental indicators, E L is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with IA Financial and E L

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

The idea behind iA Financial and E L Financial 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.