Correlation Between Elitegroup Computer and Kenda Rubber
Can any of the company-specific risk be diversified away by investing in both Elitegroup Computer and Kenda Rubber 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 Elitegroup Computer and Kenda Rubber into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Elitegroup Computer Systems and Kenda Rubber Industrial, you can compare the effects of market volatilities on Elitegroup Computer and Kenda Rubber 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 Elitegroup Computer with a short position of Kenda Rubber. Check out your portfolio center. Please also check ongoing floating volatility patterns of Elitegroup Computer and Kenda Rubber.
Diversification Opportunities for Elitegroup Computer and Kenda Rubber
0.69 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Elitegroup and Kenda is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Elitegroup Computer Systems and Kenda Rubber Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kenda Rubber Industrial and Elitegroup Computer 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 Elitegroup Computer Systems are associated (or correlated) with Kenda Rubber. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kenda Rubber Industrial has no effect on the direction of Elitegroup Computer i.e., Elitegroup Computer and Kenda Rubber go up and down completely randomly.
Pair Corralation between Elitegroup Computer and Kenda Rubber
Assuming the 90 days trading horizon Elitegroup Computer Systems is expected to generate 2.27 times more return on investment than Kenda Rubber. However, Elitegroup Computer is 2.27 times more volatile than Kenda Rubber Industrial. It trades about 0.02 of its potential returns per unit of risk. Kenda Rubber Industrial is currently generating about -0.01 per unit of risk. If you would invest 2,190 in Elitegroup Computer Systems on September 2, 2024 and sell it today you would earn a total of 190.00 from holding Elitegroup Computer Systems or generate 8.68% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Elitegroup Computer Systems vs. Kenda Rubber Industrial
Performance |
| Timeline |
| Elitegroup Computer |
| Kenda Rubber Industrial |
Elitegroup Computer and Kenda Rubber Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Elitegroup Computer and Kenda Rubber
The main advantage of trading using opposite Elitegroup Computer and Kenda Rubber positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Elitegroup Computer position performs unexpectedly, Kenda Rubber 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 Kenda Rubber will offset losses from the drop in Kenda Rubber's long position.The idea behind Elitegroup Computer Systems and Kenda Rubber Industrial 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.| Kenda Rubber vs. Chaintech Technology Corp | Kenda Rubber vs. Avision | Kenda Rubber vs. Clevo Co | Kenda Rubber vs. Elitegroup Computer Systems |
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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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