Correlation Between Great Elm and Customers Bancorp

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

By analyzing existing cross correlation between Great Elm Group and Customers Bancorp, you can compare the effects of market volatilities on Great Elm and Customers Bancorp 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 Customers Bancorp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Great Elm and Customers Bancorp.

Diversification Opportunities for Great Elm and Customers Bancorp

0.63

Correlation Coefficient

Great Elm  Customers Bancorp

Poor diversification

The 3 months correlation between Great and Customers is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Great Elm Group and Customers Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Customers Bancorp 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 Group are associated (or correlated) with Customers Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Customers Bancorp has no effect on the direction of Great Elm i.e., Great Elm and Customers Bancorp go up and down completely randomly.

Pair Corralation between Great Elm and Customers Bancorp

Assuming the 90 days horizon Great Elm Group is expected to generate 0.64 times more return on investment than Customers Bancorp. However, Great Elm Group is 1.57 times less risky than Customers Bancorp. It trades about 0.11 of its potential returns per unit of risk. Customers Bancorp is currently generating about 0.04 per unit of risk. If you would invest  2,236  in Great Elm Group on September 2, 2024 and sell it today you would earn a total of  161.00  from holding Great Elm Group or generate 7.2% return on investment over 90 days.

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

Great Elm Group  vs.  Customers Bancorp

Great Elm Group

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Great Elm Group are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting technical and fundamental indicators, Great Elm may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Customers Bancorp

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Customers Bancorp are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong fundamental drivers, Customers Bancorp 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 Customers Bancorp

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

The idea behind Great Elm Group and Customers Bancorp 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.

Check out your portfolio center.

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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.