Correlation Between Mills Music and Eltek

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

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

Diversification Opportunities for Mills Music and Eltek

0.35

Correlation Coefficient

Mills Music  Eltek

Weak diversification

The 3 months correlation between Mills and Eltek is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Mills Music Trust and Eltek in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eltek and Mills Music 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 Mills Music Trust are associated (or correlated) with Eltek. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eltek has no effect on the direction of Mills Music i.e., Mills Music and Eltek go up and down completely randomly.

Pair Corralation between Mills Music and Eltek

Assuming the 90 days horizon Mills Music Trust is expected to generate 0.43 times more return on investment than Eltek. However, Mills Music Trust is 2.33 times less risky than Eltek. It trades about 0.15 of its potential returns per unit of risk. Eltek is currently generating about -0.02 per unit of risk. If you would invest  3,467  in Mills Music Trust on September 19, 2024 and sell it today you would earn a total of  353.00  from holding Mills Music Trust or generate 10.18% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

Mills Music Trust  vs.  Eltek

Mills Music Trust

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Mills Music Trust are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Mills Music may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Eltek

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Eltek has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Eltek is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Mills Music and Eltek

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

The idea behind Mills Music Trust and Eltek 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.