Correlation Between E L and Clairvest

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

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

Diversification Opportunities for E L and Clairvest

-0.21

Correlation Coefficient

E L  Clairvest

Very good diversification

The 3 months correlation between ELF-PH and Clairvest is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding E L Financial 3 and Clairvest Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Clairvest Group and E L 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 E L Financial 3 are associated (or correlated) with Clairvest. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Clairvest Group has no effect on the direction of E L i.e., E L and Clairvest go up and down completely randomly.

Pair Corralation between E L and Clairvest

Assuming the 90 days trading horizon E L Financial 3 is expected to generate 0.32 times more return on investment than Clairvest. However, E L Financial 3 is 3.16 times less risky than Clairvest. It trades about 0.25 of its potential returns per unit of risk. Clairvest Group is currently generating about 0.03 per unit of risk. If you would invest  2,200  in E L Financial 3 on September 20, 2024 and sell it today you would earn a total of  65.00  from holding E L Financial 3 or generate 2.95% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.65%
Values	Daily Returns

E L Financial 3  vs.  Clairvest Group

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 recent stock price disturbance, may contribute to short-term losses for the investors.

Clairvest Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Clairvest Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy technical and fundamental indicators, Clairvest is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with E L and Clairvest

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

The idea behind E L Financial 3 and Clairvest Group 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.