Correlation Between Leons Furniture and E L

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

By analyzing existing cross correlation between Leons Furniture Limited and E L Financial 3, you can compare the effects of market volatilities on Leons Furniture 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 Leons Furniture with a short position of E L. Check out your portfolio center. Please also check ongoing floating volatility patterns of Leons Furniture and E L.

Diversification Opportunities for Leons Furniture and E L

0.34

Correlation Coefficient

Leons Furniture  E L

Weak diversification

The 3 months correlation between Leons and ELF-PH is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Leons Furniture Limited and E L Financial 3 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on E L Financial and Leons Furniture 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 Leons Furniture Limited 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 Leons Furniture i.e., Leons Furniture and E L go up and down completely randomly.

Pair Corralation between Leons Furniture and E L

Assuming the 90 days trading horizon Leons Furniture Limited is expected to under-perform the E L. In addition to that, Leons Furniture is 3.29 times more volatile than E L Financial 3. It trades about -0.07 of its total potential returns per unit of risk. E L Financial 3 is currently generating about 0.13 per unit of volatility. If you would invest  2,270  in E L Financial 3 on October 23, 2024 and sell it today you would earn a total of  20.00  from holding E L Financial 3 or generate 0.88% return on investment over 90 days.

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

Leons Furniture Limited  vs.  E L Financial 3

Leons Furniture

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Leons Furniture Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's technical and fundamental indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

E L Financial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days E L Financial 3 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong technical and fundamental indicators, E L is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Leons Furniture and E L

The main advantage of trading using opposite Leons Furniture and E L positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Leons Furniture 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 Leons Furniture Limited and E L Financial 3 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.