Correlation Between Great Elm and TravelCenters

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

By analyzing existing cross correlation between Great Elm Capital and TravelCenters Of America, you can compare the effects of market volatilities on Great Elm and TravelCenters 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 Great Elm with a short position of TravelCenters. Check out your portfolio center. Please also check ongoing floating volatility patterns of Great Elm and TravelCenters.

Diversification Opportunities for Great Elm and TravelCenters

0.76

Correlation Coefficient

Great Elm  TravelCenters

Poor diversification

The 3 months correlation between Great and TravelCenters is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Great Elm Capital and TravelCenters Of America in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TravelCenters Of America and Great Elm 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 Great Elm Capital are associated (or correlated) with TravelCenters. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TravelCenters Of America has no effect on the direction of Great Elm i.e., Great Elm and TravelCenters go up and down completely randomly.

Pair Corralation between Great Elm and TravelCenters

Assuming the 90 days horizon Great Elm is expected to generate 1.6 times less return on investment than TravelCenters. In addition to that, Great Elm is 2.09 times more volatile than TravelCenters Of America. It trades about 0.04 of its total potential returns per unit of risk. TravelCenters Of America is currently generating about 0.12 per unit of volatility. If you would invest  2,436  in TravelCenters Of America on September 19, 2024 and sell it today you would earn a total of  90.00  from holding TravelCenters Of America or generate 3.69% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	78.01%
Values	Daily Returns

Great Elm Capital  vs.  TravelCenters Of America

Great Elm Capital

Risk-Adjusted Performance

0 of 100

Very Weak

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

TravelCenters Of America

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days TravelCenters Of America has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, TravelCenters is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Great Elm and TravelCenters

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

The idea behind Great Elm Capital and TravelCenters Of America 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..