Correlation Between Delta Electronics and King Yuan
Can any of the company-specific risk be diversified away by investing in both Delta Electronics and King Yuan 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 Delta Electronics and King Yuan into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Delta Electronics and King Yuan Electronics, you can compare the effects of market volatilities on Delta Electronics and King Yuan 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 Delta Electronics with a short position of King Yuan. Check out your portfolio center. Please also check ongoing floating volatility patterns of Delta Electronics and King Yuan.
Diversification Opportunities for Delta Electronics and King Yuan
-0.67 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Delta and King is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding Delta Electronics and King Yuan Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on King Yuan Electronics and Delta Electronics 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 Delta Electronics are associated (or correlated) with King Yuan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of King Yuan Electronics has no effect on the direction of Delta Electronics i.e., Delta Electronics and King Yuan go up and down completely randomly.
Pair Corralation between Delta Electronics and King Yuan
Assuming the 90 days trading horizon Delta Electronics is expected to generate 2.49 times less return on investment than King Yuan. But when comparing it to its historical volatility, Delta Electronics is 1.41 times less risky than King Yuan. It trades about 0.05 of its potential returns per unit of risk. King Yuan Electronics is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 4,020 in King Yuan Electronics on November 5, 2024 and sell it today you would earn a total of 7,330 from holding King Yuan Electronics or generate 182.34% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Delta Electronics vs. King Yuan Electronics
Performance |
| Timeline |
| Delta Electronics |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
OK
| King Yuan Electronics |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Delta Electronics and King Yuan Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Delta Electronics and King Yuan
The main advantage of trading using opposite Delta Electronics and King Yuan positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Delta Electronics position performs unexpectedly, King Yuan 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 King Yuan will offset losses from the drop in King Yuan's long position.The idea behind Delta Electronics and King Yuan Electronics 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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