Correlation Between E L and Jade Leader

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

Diversification Opportunities for E L and Jade Leader

-0.67

Correlation Coefficient

E L  Jade Leader

Excellent diversification

The 3 months correlation between ELF and Jade is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding E L Financial Corp and Jade Leader Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jade Leader Corp 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 Jade Leader. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jade Leader Corp has no effect on the direction of E L i.e., E L and Jade Leader go up and down completely randomly.

Pair Corralation between E L and Jade Leader

Assuming the 90 days trading horizon E L Financial Corp is expected to generate 0.18 times more return on investment than Jade Leader. However, E L Financial Corp is 5.66 times less risky than Jade Leader. It trades about 0.04 of its potential returns per unit of risk. Jade Leader Corp is currently generating about -0.03 per unit of risk. If you would invest  129,425  in E L Financial Corp on September 22, 2024 and sell it today you would earn a total of  4,676  from holding E L Financial Corp or generate 3.61% return on investment over 90 days.

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

E L Financial Corp  vs.  Jade Leader Corp

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.

Jade Leader Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Jade Leader Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's fundamental 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 Jade Leader

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

The idea behind E L Financial Corp and Jade Leader Corp 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.