Correlation Between Merafe Resources and Elia Group

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

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

Diversification Opportunities for Merafe Resources and Elia Group

-0.2

Correlation Coefficient

Merafe Resources  Elia Group

Good diversification

The 3 months correlation between Merafe and Elia is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Merafe Resources Limited and Elia Group SANV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Elia Group SANV and Merafe Resources 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 Merafe Resources Limited are associated (or correlated) with Elia Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Elia Group SANV has no effect on the direction of Merafe Resources i.e., Merafe Resources and Elia Group go up and down completely randomly.

Pair Corralation between Merafe Resources and Elia Group

Assuming the 90 days horizon Merafe Resources Limited is expected to under-perform the Elia Group. In addition to that, Merafe Resources is 1.85 times more volatile than Elia Group SANV. It trades about -0.01 of its total potential returns per unit of risk. Elia Group SANV is currently generating about 0.08 per unit of volatility. If you would invest  7,238  in Elia Group SANV on December 26, 2024 and sell it today you would earn a total of  962.00  from holding Elia Group SANV or generate 13.29% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.39%
Values	Daily Returns

Merafe Resources Limited  vs.  Elia Group SANV

Merafe Resources

Risk-Adjusted Performance

Very Weak

Over the last 90 days Merafe Resources Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Merafe Resources is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Elia Group SANV

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Elia Group SANV are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak forward indicators, Elia Group reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Merafe Resources and Elia Group

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

The idea behind Merafe Resources Limited and Elia Group SANV 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.