Correlation Between Elite Material and Greatek Electronics
Can any of the company-specific risk be diversified away by investing in both Elite Material and Greatek 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 Greatek 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 Greatek Electronics, you can compare the effects of market volatilities on Elite Material and Greatek 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 Greatek Electronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Elite Material and Greatek Electronics.
Diversification Opportunities for Elite Material and Greatek Electronics
-0.14 | Correlation Coefficient |
Good diversification
The 3 months correlation between Elite and Greatek is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Elite Material Co and Greatek Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Greatek 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 Greatek Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Greatek Electronics has no effect on the direction of Elite Material i.e., Elite Material and Greatek Electronics go up and down completely randomly.
Pair Corralation between Elite Material and Greatek Electronics
Assuming the 90 days trading horizon Elite Material Co is expected to generate 2.24 times more return on investment than Greatek Electronics. However, Elite Material is 2.24 times more volatile than Greatek Electronics. It trades about 0.01 of its potential returns per unit of risk. Greatek Electronics is currently generating about -0.01 per unit of risk. If you would invest 49,500 in Elite Material Co on August 27, 2024 and sell it today you would lose (1,300) from holding Elite Material Co or give up 2.63% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Elite Material Co vs. Greatek Electronics
Performance |
| Timeline |
| Elite Material |
| Greatek Electronics |
Elite Material and Greatek Electronics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Elite Material and Greatek Electronics
The main advantage of trading using opposite Elite Material and Greatek Electronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Elite Material position performs unexpectedly, Greatek 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 Greatek Electronics will offset losses from the drop in Greatek Electronics' long position.| Elite Material vs. Novatek Microelectronics Corp | Elite Material vs. Quanta Computer | Elite Material vs. United Microelectronics |
| Greatek Electronics vs. Novatek Microelectronics Corp | Greatek Electronics vs. Quanta Computer | Greatek Electronics vs. United Microelectronics |
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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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