Correlation Between Mold Tek and EPL

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

By analyzing existing cross correlation between Mold Tek Packaging Limited and EPL Limited, you can compare the effects of market volatilities on Mold Tek and EPL 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 Mold Tek with a short position of EPL. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mold Tek and EPL.

Diversification Opportunities for Mold Tek and EPL

-0.47

Correlation Coefficient

Mold Tek  EPL

Very good diversification

The 3 months correlation between Mold and EPL is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Mold Tek Packaging Limited and EPL Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EPL Limited and Mold Tek 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 Mold Tek Packaging Limited are associated (or correlated) with EPL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EPL Limited has no effect on the direction of Mold Tek i.e., Mold Tek and EPL go up and down completely randomly.

Pair Corralation between Mold Tek and EPL

Assuming the 90 days trading horizon Mold Tek Packaging Limited is expected to under-perform the EPL. But the stock apears to be less risky and, when comparing its historical volatility, Mold Tek Packaging Limited is 1.56 times less risky than EPL. The stock trades about -0.15 of its potential returns per unit of risk. The EPL Limited is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  25,459  in EPL Limited on September 5, 2024 and sell it today you would earn a total of  3,086  from holding EPL Limited or generate 12.12% return on investment over 90 days.

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

Mold Tek Packaging Limited  vs.  EPL Limited

Mold Tek Packaging

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mold Tek Packaging Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Even with uncertain performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in January 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

EPL Limited

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in EPL Limited are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, EPL exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Mold Tek and EPL

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

The idea behind Mold Tek Packaging Limited and EPL Limited 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.