Correlation Between Awea Mechantronic and Everlight Chemical
Can any of the company-specific risk be diversified away by investing in both Awea Mechantronic and Everlight Chemical 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 Awea Mechantronic and Everlight Chemical into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Awea Mechantronic Co and Everlight Chemical Industrial, you can compare the effects of market volatilities on Awea Mechantronic and Everlight Chemical 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 Awea Mechantronic with a short position of Everlight Chemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Awea Mechantronic and Everlight Chemical.
Diversification Opportunities for Awea Mechantronic and Everlight Chemical
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Awea and Everlight is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Awea Mechantronic Co and Everlight Chemical Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Everlight Chemical and Awea Mechantronic 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 Awea Mechantronic Co are associated (or correlated) with Everlight Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Everlight Chemical has no effect on the direction of Awea Mechantronic i.e., Awea Mechantronic and Everlight Chemical go up and down completely randomly.
Pair Corralation between Awea Mechantronic and Everlight Chemical
Assuming the 90 days trading horizon Awea Mechantronic Co is expected to under-perform the Everlight Chemical. But the stock apears to be less risky and, when comparing its historical volatility, Awea Mechantronic Co is 1.32 times less risky than Everlight Chemical. The stock trades about -0.25 of its potential returns per unit of risk. The Everlight Chemical Industrial is currently generating about -0.19 of returns per unit of risk over similar time horizon. If you would invest 2,415 in Everlight Chemical Industrial on September 2, 2024 and sell it today you would lose (160.00) from holding Everlight Chemical Industrial or give up 6.63% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Awea Mechantronic Co vs. Everlight Chemical Industrial
Performance |
| Timeline |
| Awea Mechantronic |
| Everlight Chemical |
Awea Mechantronic and Everlight Chemical Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Awea Mechantronic and Everlight Chemical
The main advantage of trading using opposite Awea Mechantronic and Everlight Chemical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Awea Mechantronic position performs unexpectedly, Everlight Chemical 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 Everlight Chemical will offset losses from the drop in Everlight Chemical's long position.| Awea Mechantronic vs. Anderson Industrial Corp | Awea Mechantronic vs. Kaulin Mfg | Awea Mechantronic vs. Roundtop Machinery Industries | Awea Mechantronic vs. Tong Tai Machine Tool |
| Everlight Chemical vs. Oriental Union Chemical | Everlight Chemical vs. Ho Tung Chemical | Everlight Chemical vs. China Man Made Fiber | Everlight Chemical vs. Sunko Ink Co |
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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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