Correlation Between Elcora Advanced and Midland Exploration

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

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

Diversification Opportunities for Elcora Advanced and Midland Exploration

0.5

Correlation Coefficient

Elcora Advanced  Midland Exploration

Very weak diversification

The 3 months correlation between Elcora and Midland is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Elcora Advanced Materials and Midland Exploration in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Midland Exploration and Elcora Advanced 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 Elcora Advanced Materials are associated (or correlated) with Midland Exploration. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Midland Exploration has no effect on the direction of Elcora Advanced i.e., Elcora Advanced and Midland Exploration go up and down completely randomly.

Pair Corralation between Elcora Advanced and Midland Exploration

Assuming the 90 days horizon Elcora Advanced Materials is expected to generate 3.91 times more return on investment than Midland Exploration. However, Elcora Advanced is 3.91 times more volatile than Midland Exploration. It trades about 0.01 of its potential returns per unit of risk. Midland Exploration is currently generating about -0.06 per unit of risk. If you would invest  2.50  in Elcora Advanced Materials on June 12, 2024 and sell it today you would lose (0.50) from holding Elcora Advanced Materials or give up 20.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.39%
Values	Daily Returns

Elcora Advanced Materials  vs.  Midland Exploration

Elcora Advanced Materials

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Elcora Advanced Materials has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly abnormal basic indicators, Elcora Advanced may actually be approaching a critical reversion point that can send shares even higher in October 2024.

Midland Exploration

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Midland Exploration has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Pair Trading with Elcora Advanced and Midland Exploration

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

The idea behind Elcora Advanced Materials and Midland Exploration 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.