Correlation Between E L and IDEX Metals

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

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

Diversification Opportunities for E L and IDEX Metals

-0.19

Correlation Coefficient

E L  IDEX Metals

Good diversification

The 3 months correlation between ELF and IDEX is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding E L Financial Corp and IDEX Metals Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IDEX Metals Corp and E L 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 E L Financial Corp are associated (or correlated) with IDEX Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IDEX Metals Corp has no effect on the direction of E L i.e., E L and IDEX Metals go up and down completely randomly.

Pair Corralation between E L and IDEX Metals

Assuming the 90 days trading horizon E L Financial Corp is expected to generate 0.65 times more return on investment than IDEX Metals. However, E L Financial Corp is 1.54 times less risky than IDEX Metals. It trades about 0.16 of its potential returns per unit of risk. IDEX Metals Corp is currently generating about -0.01 per unit of risk. If you would invest  1,273  in E L Financial Corp on April 22, 2025 and sell it today you would earn a total of  267.00  from holding E L Financial Corp or generate 20.97% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	46.03%
Values	Daily Returns

E L Financial Corp  vs.  IDEX Metals Corp

E L Financial

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in E L Financial Corp are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating technical and fundamental indicators, E L displayed solid returns over the last few months and may actually be approaching a breakup point.

IDEX Metals Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days IDEX Metals Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable technical and fundamental indicators, IDEX Metals is not utilizing all of its potentials. The recent stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with E L and IDEX Metals

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

The idea behind E L Financial Corp and IDEX Metals 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.

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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.