Correlation Between Core Molding and Element Solutions

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

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

Diversification Opportunities for Core Molding and Element Solutions

-0.33

Correlation Coefficient

Core Molding  Element Solutions

Very good diversification

The 3 months correlation between Core and Element is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Core Molding Technologies and Element Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Element Solutions and Core Molding 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 Core Molding Technologies are associated (or correlated) with Element Solutions. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Element Solutions has no effect on the direction of Core Molding i.e., Core Molding and Element Solutions go up and down completely randomly.

Pair Corralation between Core Molding and Element Solutions

Considering the 90-day investment horizon Core Molding Technologies is expected to under-perform the Element Solutions. In addition to that, Core Molding is 1.32 times more volatile than Element Solutions. It trades about -0.03 of its total potential returns per unit of risk. Element Solutions is currently generating about 0.06 per unit of volatility. If you would invest  2,674  in Element Solutions on August 30, 2024 and sell it today you would earn a total of  173.00  from holding Element Solutions or generate 6.47% return on investment over 90 days.

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

Core Molding Technologies  vs.  Element Solutions

Core Molding Technologies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Core Molding Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable primary indicators, Core Molding is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Element Solutions

Risk-Adjusted Performance

4 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Element Solutions are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite fairly unsteady basic indicators, Element Solutions may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Core Molding and Element Solutions

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

The idea behind Core Molding Technologies and Element Solutions 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.