Correlation Between Verisk Analytics and Great Elm

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

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

Diversification Opportunities for Verisk Analytics and Great Elm

0.71

Correlation Coefficient

Verisk Analytics  Great Elm

Poor diversification

The 3 months correlation between Verisk and Great is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Verisk Analytics and Great Elm Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Great Elm Capital and Verisk Analytics 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 Verisk Analytics are associated (or correlated) with Great Elm. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Great Elm Capital has no effect on the direction of Verisk Analytics i.e., Verisk Analytics and Great Elm go up and down completely randomly.

Pair Corralation between Verisk Analytics and Great Elm

Given the investment horizon of 90 days Verisk Analytics is expected to generate 3.67 times more return on investment than Great Elm. However, Verisk Analytics is 3.67 times more volatile than Great Elm Capital. It trades about 0.09 of its potential returns per unit of risk. Great Elm Capital is currently generating about 0.06 per unit of risk. If you would invest  26,879  in Verisk Analytics on September 13, 2024 and sell it today you would earn a total of  1,623  from holding Verisk Analytics or generate 6.04% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	90.48%
Values	Daily Returns

Verisk Analytics  vs.  Great Elm Capital

Verisk Analytics

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Verisk Analytics are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, Verisk Analytics is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

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 fairly strong fundamental indicators, Great Elm is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Verisk Analytics and Great Elm

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

The idea behind Verisk Analytics and Great Elm Capital 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.