Can any of the company-specific risk be diversified away by investing in both Element Fleet and Enerplus 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 Element Fleet and Enerplus into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Element Fleet Management and Enerplus, you can compare the effects of market volatilities on Element Fleet and Enerplus 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 Element Fleet with a short position of Enerplus. Check out your portfolio center. Please also check ongoing floating volatility patterns of Element Fleet and Enerplus.
Diversification Opportunities for Element Fleet and Enerplus
The 3 months correlation between Element and Enerplus is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Element Fleet Management and Enerplus in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Enerplus and Element Fleet 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 Element Fleet Management are associated (or correlated) with Enerplus. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Enerplus has no effect on the direction of Element Fleet i.e., Element Fleet and Enerplus go up and down completely randomly.
Pair Corralation between Element Fleet and Enerplus
Assuming the 90 days trading horizon Element Fleet Management is expected to generate 1.72 times more return on investment than Enerplus. However, Element Fleet is 1.72 times more volatile than Enerplus. It trades about 0.2 of its potential returns per unit of risk. Enerplus is currently generating about 0.01 per unit of risk. If you would invest 2,285 in Element Fleet Management on March 6, 2024 and sell it today you would earn a total of 189.00 from holding Element Fleet Management or generate 8.27% return on investment over 90 days.
Compared to the overall equity markets, risk-adjusted returns on investments in Element Fleet Management are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Element Fleet may actually be approaching a critical reversion point that can send shares even higher in July 2024.
Compared to the overall equity markets, risk-adjusted returns on investments in Enerplus are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal technical and fundamental indicators, Enerplus may actually be approaching a critical reversion point that can send shares even higher in July 2024.