Correlation Between Matrix and Electra Co

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

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

Diversification Opportunities for Matrix and Electra Co

0.64

Correlation Coefficient

Matrix  Electra Co

Poor diversification

The 3 months correlation between Matrix and Electra is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Matrix and Electra Co Pr in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Electra Co Pr and Matrix 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 Matrix are associated (or correlated) with Electra Co. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Electra Co Pr has no effect on the direction of Matrix i.e., Matrix and Electra Co go up and down completely randomly.

Pair Corralation between Matrix and Electra Co

Assuming the 90 days trading horizon Matrix is expected to generate 1.42 times less return on investment than Electra Co. But when comparing it to its historical volatility, Matrix is 1.83 times less risky than Electra Co. It trades about 0.21 of its potential returns per unit of risk. Electra Co Pr is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  752,900  in Electra Co Pr on August 30, 2024 and sell it today you would earn a total of  171,500  from holding Electra Co Pr or generate 22.78% return on investment over 90 days.

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

Matrix  vs.  Electra Co Pr

Matrix

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Matrix are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Matrix sustained solid returns over the last few months and may actually be approaching a breakup point.

Electra Co Pr

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Electra Co Pr are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Electra Co sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Matrix and Electra Co

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

The idea behind Matrix and Electra Co Pr 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.

Check out your portfolio center.

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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.