Correlation Between Elco and Beeio Honey

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

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

Diversification Opportunities for Elco and Beeio Honey

-0.85

Correlation Coefficient

Elco  Beeio Honey

Pay attention - limited upside

The 3 months correlation between Elco and Beeio is -0.85. Overlapping area represents the amount of risk that can be diversified away by holding Elco and Beeio Honey in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Beeio Honey and Elco 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 Elco are associated (or correlated) with Beeio Honey. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Beeio Honey has no effect on the direction of Elco i.e., Elco and Beeio Honey go up and down completely randomly.

Pair Corralation between Elco and Beeio Honey

Assuming the 90 days trading horizon Elco is expected to generate 0.29 times more return on investment than Beeio Honey. However, Elco is 3.43 times less risky than Beeio Honey. It trades about 0.22 of its potential returns per unit of risk. Beeio Honey is currently generating about -0.03 per unit of risk. If you would invest  974,635  in Elco on September 29, 2024 and sell it today you would earn a total of  484,365  from holding Elco or generate 49.7% return on investment over 90 days.

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

Elco  vs.  Beeio Honey

Elco

Risk-Adjusted Performance

24 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Elco are ranked lower than 24 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Elco sustained solid returns over the last few months and may actually be approaching a breakup point.

Beeio Honey

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Beeio Honey has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Elco and Beeio Honey

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

The idea behind Elco and Beeio Honey 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..