Correlation Between Great Elm and Atlas Corp

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

Diversification Opportunities for Great Elm and Atlas Corp

0.75

Correlation Coefficient

Great Elm  Atlas Corp

Poor diversification

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

Pair Corralation between Great Elm and Atlas Corp

Assuming the 90 days horizon Great Elm is expected to generate 1.74 times less return on investment than Atlas Corp. But when comparing it to its historical volatility, Great Elm Capital is 1.06 times less risky than Atlas Corp. It trades about 0.06 of its potential returns per unit of risk. Atlas Corp is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  2,456  in Atlas Corp on September 2, 2024 and sell it today you would earn a total of  68.00  from holding Atlas Corp or generate 2.77% return on investment over 90 days.

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

Great Elm Capital  vs.  Atlas Corp

Great Elm Capital

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Great Elm Capital are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. 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.

Atlas Corp

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Atlas Corp are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental indicators, Atlas Corp is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Great Elm and Atlas Corp

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

The idea behind Great Elm Capital and Atlas 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.