Correlation Between Elspec and Target
Can any of the company-specific risk be diversified away by investing in both Elspec and Target 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 Elspec and Target into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Elspec and Target, you can compare the effects of market volatilities on Elspec and Target 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 Elspec with a short position of Target. Check out your portfolio center. Please also check ongoing floating volatility patterns of Elspec and Target.
Diversification Opportunities for Elspec and Target
Very poor diversification
The 3 months correlation between Elspec and Target is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Elspec and Target in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Target and Elspec 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 Elspec are associated (or correlated) with Target. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Target has no effect on the direction of Elspec i.e., Elspec and Target go up and down completely randomly.
Pair Corralation between Elspec and Target
Assuming the 90 days trading horizon Elspec is expected to under-perform the Target. In addition to that, Elspec is 1.0 times more volatile than Target. It trades about -0.21 of its total potential returns per unit of risk. Target is currently generating about 0.23 per unit of volatility. If you would invest 15,199 in Target on December 29, 2023 and sell it today you would earn a total of 2,268 from holding Target or generate 14.92% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Strong |
Accuracy | 77.27% |
Values | Daily Returns |
Elspec vs. Target
Performance |
Timeline |
Elspec |
Target |
Elspec and Target Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Elspec and Target
The main advantage of trading using opposite Elspec and Target positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Elspec position performs unexpectedly, Target 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 Target will offset losses from the drop in Target's long position.Elspec vs. Nice | Elspec vs. Bank Leumi Le Israel | Elspec vs. ICL Israel Chemicals | Elspec vs. Mizrahi Tefahot |
Target vs. Dollar General | Target vs. Grocery Outlet Holding | Target vs. Trxade Group | Target vs. Davis Commodities Limited |
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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.
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