Correlation Between Inspired Entertainment and Elray Resources

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

By analyzing existing cross correlation between Inspired Entertainment and Elray Resources, you can compare the effects of market volatilities on Inspired Entertainment and Elray Resources 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 Inspired Entertainment with a short position of Elray Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Inspired Entertainment and Elray Resources.

Diversification Opportunities for Inspired Entertainment and Elray Resources

0.06

Correlation Coefficient

Inspired Entertainment  Elray Resources

Significant diversification

The 3 months correlation between Inspired and Elray is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Inspired Entertainment and Elray Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Elray Resources and Inspired Entertainment 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 Inspired Entertainment are associated (or correlated) with Elray Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Elray Resources has no effect on the direction of Inspired Entertainment i.e., Inspired Entertainment and Elray Resources go up and down completely randomly.

Pair Corralation between Inspired Entertainment and Elray Resources

Given the investment horizon of 90 days Inspired Entertainment is expected to under-perform the Elray Resources. But the stock apears to be less risky and, when comparing its historical volatility, Inspired Entertainment is 10.51 times less risky than Elray Resources. The stock trades about -0.27 of its potential returns per unit of risk. The Elray Resources is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  0.05  in Elray Resources on September 19, 2024 and sell it today you would lose (0.01) from holding Elray Resources or give up 20.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

Inspired Entertainment  vs.  Elray Resources

Inspired Entertainment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Inspired Entertainment has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Elray Resources

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Elray Resources are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat fragile basic indicators, Elray Resources sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Inspired Entertainment and Elray Resources

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

The idea behind Inspired Entertainment and Elray Resources 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.