Correlation Between Canadian General and E L

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

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

Diversification Opportunities for Canadian General and E L

-0.46

Correlation Coefficient

Canadian General  E L

Very good diversification

The 3 months correlation between Canadian and ELF-PH is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Canadian General Investments 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 Canadian General 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 Canadian General Investments 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 Canadian General i.e., Canadian General and E L go up and down completely randomly.

Pair Corralation between Canadian General and E L

Assuming the 90 days trading horizon Canadian General is expected to generate 13.83 times less return on investment than E L. In addition to that, Canadian General is 1.35 times more volatile than E L Financial 3. It trades about 0.01 of its total potential returns per unit of risk. E L Financial 3 is currently generating about 0.18 per unit of volatility. If you would invest  2,225  in E L Financial 3 on September 25, 2024 and sell it today you would earn a total of  45.00  from holding E L Financial 3 or generate 2.02% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	95.45%
Values	Daily Returns

Canadian General Investments  vs.  E L Financial 3

Canadian General Inv

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Canadian General Investments are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy forward indicators, Canadian General is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the 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 latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Canadian General and E L

The main advantage of trading using opposite Canadian General and E L positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Canadian General 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 Canadian General Investments 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.