Correlation Between ILFS Investment and EPL

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

By analyzing existing cross correlation between ILFS Investment Managers and EPL Limited, you can compare the effects of market volatilities on ILFS Investment and EPL 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 ILFS Investment with a short position of EPL. Check out your portfolio center. Please also check ongoing floating volatility patterns of ILFS Investment and EPL.

Diversification Opportunities for ILFS Investment and EPL

-0.32

Correlation Coefficient

ILFS Investment  EPL

Very good diversification

The 3 months correlation between ILFS and EPL is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding ILFS Investment Managers and EPL Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EPL Limited and ILFS Investment 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 ILFS Investment Managers are associated (or correlated) with EPL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EPL Limited has no effect on the direction of ILFS Investment i.e., ILFS Investment and EPL go up and down completely randomly.

Pair Corralation between ILFS Investment and EPL

Assuming the 90 days trading horizon ILFS Investment Managers is expected to under-perform the EPL. But the stock apears to be less risky and, when comparing its historical volatility, ILFS Investment Managers is 1.05 times less risky than EPL. The stock trades about -0.09 of its potential returns per unit of risk. The EPL Limited is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  19,906  in EPL Limited on April 24, 2025 and sell it today you would earn a total of  3,284  from holding EPL Limited or generate 16.5% return on investment over 90 days.

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

ILFS Investment Managers  vs.  EPL Limited

ILFS Investment Managers

Risk-Adjusted Performance

Very Weak

Over the last 90 days ILFS Investment Managers has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

EPL Limited

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in EPL Limited are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak technical and fundamental indicators, EPL exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ILFS Investment and EPL

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

The idea behind ILFS Investment Managers and EPL Limited 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..