Correlation Between Merrill Lynch and Ellomay Capital

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

By analyzing existing cross correlation between Merrill Lynch Depositor and Ellomay Capital, you can compare the effects of market volatilities on Merrill Lynch and Ellomay Capital 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 Merrill Lynch with a short position of Ellomay Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merrill Lynch and Ellomay Capital.

Diversification Opportunities for Merrill Lynch and Ellomay Capital

-0.54

Correlation Coefficient

Merrill Lynch  Ellomay Capital

Excellent diversification

The 3 months correlation between Merrill and Ellomay is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Merrill Lynch Depositor and Ellomay Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ellomay Capital and Merrill Lynch 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 Merrill Lynch Depositor are associated (or correlated) with Ellomay Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ellomay Capital has no effect on the direction of Merrill Lynch i.e., Merrill Lynch and Ellomay Capital go up and down completely randomly.

Pair Corralation between Merrill Lynch and Ellomay Capital

Considering the 90-day investment horizon Merrill Lynch Depositor is expected to under-perform the Ellomay Capital. But the stock apears to be less risky and, when comparing its historical volatility, Merrill Lynch Depositor is 1.36 times less risky than Ellomay Capital. The stock trades about -0.01 of its potential returns per unit of risk. The Ellomay Capital is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  1,549  in Ellomay Capital on October 10, 2024 and sell it today you would earn a total of  91.00  from holding Ellomay Capital or generate 5.87% return on investment over 90 days.

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

Merrill Lynch Depositor  vs.  Ellomay Capital

Merrill Lynch Depositor

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Merrill Lynch Depositor has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Merrill Lynch is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Ellomay Capital

Risk-Adjusted Performance

10 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Ellomay Capital are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain essential indicators, Ellomay Capital displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Merrill Lynch and Ellomay Capital

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

The idea behind Merrill Lynch Depositor and Ellomay Capital 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.