Correlation Between E L and Fortis

Can any of the company-specific risk be diversified away by investing in both E L and Fortis 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 Fortis 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 Fortis Inc, you can compare the effects of market volatilities on E L and Fortis 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 Fortis. Check out your portfolio center. Please also check ongoing floating volatility patterns of E L and Fortis.

Diversification Opportunities for E L and Fortis

-0.36

Correlation Coefficient

E L  Fortis

Very good diversification

The 3 months correlation between ELF-PH and Fortis is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding E L Financial 3 and Fortis Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fortis Inc 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 Fortis. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fortis Inc has no effect on the direction of E L i.e., E L and Fortis go up and down completely randomly.

Pair Corralation between E L and Fortis

Assuming the 90 days trading horizon E L Financial 3 is expected to under-perform the Fortis. But the preferred stock apears to be less risky and, when comparing its historical volatility, E L Financial 3 is 1.55 times less risky than Fortis. The preferred stock trades about -0.03 of its potential returns per unit of risk. The Fortis Inc is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  5,979  in Fortis Inc on August 31, 2024 and sell it today you would earn a total of  289.00  from holding Fortis Inc or generate 4.83% return on investment over 90 days.

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

E L Financial 3  vs.  Fortis Inc

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

Fortis Inc

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Fortis Inc are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Fortis 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 Fortis

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

The idea behind E L Financial 3 and Fortis Inc 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.