Correlation Between E L and Clear Blue

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

By analyzing existing cross correlation between E L Financial Corp and Clear Blue Technologies, you can compare the effects of market volatilities on E L and Clear Blue 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 Clear Blue. Check out your portfolio center. Please also check ongoing floating volatility patterns of E L and Clear Blue.

Diversification Opportunities for E L and Clear Blue

-0.75

Correlation Coefficient

E L  Clear Blue

Pay attention - limited upside

The 3 months correlation between ELF and Clear is -0.75. Overlapping area represents the amount of risk that can be diversified away by holding E L Financial Corp and Clear Blue Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Clear Blue Technologies 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 Corp are associated (or correlated) with Clear Blue. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Clear Blue Technologies has no effect on the direction of E L i.e., E L and Clear Blue go up and down completely randomly.

Pair Corralation between E L and Clear Blue

Assuming the 90 days trading horizon E L is expected to generate 1.11 times less return on investment than Clear Blue. But when comparing it to its historical volatility, E L Financial Corp is 9.24 times less risky than Clear Blue. It trades about 0.11 of its potential returns per unit of risk. Clear Blue Technologies is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  7.00  in Clear Blue Technologies on September 25, 2024 and sell it today you would lose (5.00) from holding Clear Blue Technologies or give up 71.43% of portfolio value over 90 days.

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

E L Financial Corp  vs.  Clear Blue Technologies

E L Financial

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in E L Financial Corp are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy technical and fundamental indicators, E L is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Clear Blue Technologies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Clear Blue Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's essential indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with E L and Clear Blue

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

The idea behind E L Financial Corp and Clear Blue Technologies 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.