Correlation Between Transport and EPL

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

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

Diversification Opportunities for Transport and EPL

0.56

Correlation Coefficient

Transport  EPL

Very weak diversification

The 3 months correlation between Transport and EPL is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Transport of and EPL Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EPL Limited and Transport 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 Transport of 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 Transport i.e., Transport and EPL go up and down completely randomly.

Pair Corralation between Transport and EPL

Assuming the 90 days trading horizon Transport is expected to generate 1.39 times less return on investment than EPL. But when comparing it to its historical volatility, Transport of is 1.13 times less risky than EPL. It trades about 0.12 of its potential returns per unit of risk. EPL Limited is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  19,497  in EPL Limited on April 23, 2025 and sell it today you would earn a total of  3,792  from holding EPL Limited or generate 19.45% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.44%
Values	Daily Returns

Transport of  vs.  EPL Limited

Transport

Risk-Adjusted Performance

OK

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

EPL Limited

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in EPL Limited are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, EPL exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Transport and EPL

The main advantage of trading using opposite Transport and EPL positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Transport 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 Transport of 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.