Correlation Between Quicklizard and Elco

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

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

Diversification Opportunities for Quicklizard and Elco

0.45

Correlation Coefficient

Quicklizard  Elco

Very weak diversification

The 3 months correlation between Quicklizard and Elco is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Quicklizard and Elco in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Elco and Quicklizard 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 Quicklizard are associated (or correlated) with Elco. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Elco has no effect on the direction of Quicklizard i.e., Quicklizard and Elco go up and down completely randomly.

Pair Corralation between Quicklizard and Elco

Assuming the 90 days trading horizon Quicklizard is expected to under-perform the Elco. But the stock apears to be less risky and, when comparing its historical volatility, Quicklizard is 1.47 times less risky than Elco. The stock trades about 0.0 of its potential returns per unit of risk. The Elco is currently generating about 0.38 of returns per unit of risk over similar time horizon. If you would invest  1,065,000  in Elco on September 25, 2024 and sell it today you would earn a total of  420,000  from holding Elco or generate 39.44% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	97.83%
Values	Daily Returns

Quicklizard  vs.  Elco

Quicklizard

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Quicklizard has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Quicklizard is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Elco

Risk-Adjusted Performance

30 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Elco are ranked lower than 30 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Elco sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Quicklizard and Elco

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

The idea behind Quicklizard and Elco 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.