Correlation Between Elite Material and Chicony Electronics
Can any of the company-specific risk be diversified away by investing in both Elite Material and Chicony Electronics 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 Elite Material and Chicony Electronics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Elite Material Co and Chicony Electronics Co, you can compare the effects of market volatilities on Elite Material and Chicony Electronics 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 Elite Material with a short position of Chicony Electronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Elite Material and Chicony Electronics.
Diversification Opportunities for Elite Material and Chicony Electronics
-0.08 | Correlation Coefficient |
Good diversification
The 3 months correlation between Elite and Chicony is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Elite Material Co and Chicony Electronics Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chicony Electronics and Elite Material 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 Elite Material Co are associated (or correlated) with Chicony Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chicony Electronics has no effect on the direction of Elite Material i.e., Elite Material and Chicony Electronics go up and down completely randomly.
Pair Corralation between Elite Material and Chicony Electronics
Assuming the 90 days trading horizon Elite Material Co is expected to generate 1.52 times more return on investment than Chicony Electronics. However, Elite Material is 1.52 times more volatile than Chicony Electronics Co. It trades about 0.08 of its potential returns per unit of risk. Chicony Electronics Co is currently generating about 0.07 per unit of risk. If you would invest 18,500 in Elite Material Co on August 31, 2024 and sell it today you would earn a total of 27,800 from holding Elite Material Co or generate 150.27% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Elite Material Co vs. Chicony Electronics Co
Performance |
| Timeline |
| Elite Material |
| Chicony Electronics |
Elite Material and Chicony Electronics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Elite Material and Chicony Electronics
The main advantage of trading using opposite Elite Material and Chicony Electronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Elite Material position performs unexpectedly, Chicony Electronics 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 Chicony Electronics will offset losses from the drop in Chicony Electronics' long position.| Elite Material vs. Compeq Manufacturing Co | Elite Material vs. ITEQ Corp | Elite Material vs. Unimicron Technology Corp | Elite Material vs. Chicony Electronics 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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