Correlation Between Element Global and Elamex SA

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

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

Diversification Opportunities for Element Global and Elamex SA

1.0

Correlation Coefficient

Element Global  Elamex SA

No risk reduction

The 3 months correlation between Element and Elamex is 1.0. Overlapping area represents the amount of risk that can be diversified away by holding Element Global and Elamex SA de in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Elamex SA de and Element Global 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 Element Global are associated (or correlated) with Elamex SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Elamex SA de has no effect on the direction of Element Global i.e., Element Global and Elamex SA go up and down completely randomly.

Pair Corralation between Element Global and Elamex SA

Given the investment horizon of 90 days Element Global is expected to generate 19.78 times more return on investment than Elamex SA. However, Element Global is 19.78 times more volatile than Elamex SA de. It trades about 0.06 of its potential returns per unit of risk. Elamex SA de is currently generating about -0.06 per unit of risk. If you would invest  0.01  in Element Global on September 12, 2024 and sell it today you would earn a total of  0.00  from holding Element Global or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	99.8%
Values	Daily Returns

Element Global  vs.  Elamex SA de

Element Global

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Element Global has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent technical and fundamental indicators, Element Global is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Elamex SA de

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Elamex SA de has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable primary indicators, Elamex SA is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Element Global and Elamex SA

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

The idea behind Element Global and Elamex SA de 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.