Correlation Between Allied Properties and E L

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

By analyzing existing cross correlation between Allied Properties Real and E L Financial Corp, you can compare the effects of market volatilities on Allied Properties and E L 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 Allied Properties with a short position of E L. Check out your portfolio center. Please also check ongoing floating volatility patterns of Allied Properties and E L.

Diversification Opportunities for Allied Properties and E L

0.04

Correlation Coefficient

Allied Properties  E L

Significant diversification

The 3 months correlation between Allied and ELF is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Allied Properties Real and E L Financial Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on E L Financial and Allied Properties 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 Allied Properties Real are associated (or correlated) with E L. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of E L Financial has no effect on the direction of Allied Properties i.e., Allied Properties and E L go up and down completely randomly.

Pair Corralation between Allied Properties and E L

Assuming the 90 days trading horizon Allied Properties Real is expected to under-perform the E L. But the stock apears to be less risky and, when comparing its historical volatility, Allied Properties Real is 3.09 times less risky than E L. The stock trades about -0.02 of its potential returns per unit of risk. The E L Financial Corp is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  105,173  in E L Financial Corp on February 24, 2024 and sell it today you would earn a total of  4,777  from holding E L Financial Corp or generate 4.54% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Allied Properties Real  vs.  E L Financial Corp

Allied Properties Real

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Allied Properties Real has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Allied Properties is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

E L Financial

Risk-Adjusted Performance

5 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in E L Financial Corp are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal technical and fundamental indicators, E L displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Allied Properties and E L

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

The idea behind Allied Properties Real and E L Financial Corp 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.