Correlation Between USCorp and Elkhorn

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

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

Diversification Opportunities for USCorp and Elkhorn

0.46

Correlation Coefficient

USCorp  Elkhorn

Very weak diversification

The 3 months correlation between USCorp and Elkhorn is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding USCorp and Elkhorn in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Elkhorn and USCorp 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 USCorp are associated (or correlated) with Elkhorn. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Elkhorn has no effect on the direction of USCorp i.e., USCorp and Elkhorn go up and down completely randomly.

Pair Corralation between USCorp and Elkhorn

If you would invest  0.01  in USCorp on October 7, 2024 and sell it today you would earn a total of  0.01  from holding USCorp or generate 100.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	2.44%
Values	Daily Returns

USCorp  vs.  Elkhorn

USCorp

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in USCorp are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak fundamental indicators, USCorp unveiled solid returns over the last few months and may actually be approaching a breakup point.

Elkhorn

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Elkhorn has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Elkhorn is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with USCorp and Elkhorn

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

The idea behind USCorp and Elkhorn 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.