Correlation Between Midland Exploration and Elcora Advanced

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

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

Diversification Opportunities for Midland Exploration and Elcora Advanced

0.47

Correlation Coefficient

Midland Exploration  Elcora Advanced

Very weak diversification

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

Pair Corralation between Midland Exploration and Elcora Advanced

Given the investment horizon of 90 days Midland Exploration is expected to generate 0.25 times more return on investment than Elcora Advanced. However, Midland Exploration is 4.04 times less risky than Elcora Advanced. It trades about -0.04 of its potential returns per unit of risk. Elcora Advanced Materials is currently generating about -0.04 per unit of risk. If you would invest  33.00  in Midland Exploration on June 14, 2024 and sell it today you would lose (1.00) from holding Midland Exploration or give up 3.03% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.45%
Values	Daily Returns

Midland Exploration  vs.  Elcora Advanced Materials

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 abnormal 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.

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.

Pair Trading with Midland Exploration and Elcora Advanced

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

The idea behind Midland Exploration and Elcora Advanced Materials 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.