Correlation Between Elite Material and Sinbon Electronics
Can any of the company-specific risk be diversified away by investing in both Elite Material and Sinbon 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 Sinbon 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 Sinbon Electronics Co, you can compare the effects of market volatilities on Elite Material and Sinbon 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 Sinbon Electronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Elite Material and Sinbon Electronics.
Diversification Opportunities for Elite Material and Sinbon Electronics
-0.17 | Correlation Coefficient |
Good diversification
The 3 months correlation between Elite and Sinbon is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Elite Material Co and Sinbon Electronics Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sinbon 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 Sinbon Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sinbon Electronics has no effect on the direction of Elite Material i.e., Elite Material and Sinbon Electronics go up and down completely randomly.
Pair Corralation between Elite Material and Sinbon Electronics
Assuming the 90 days trading horizon Elite Material Co is expected to generate 1.58 times more return on investment than Sinbon Electronics. However, Elite Material is 1.58 times more volatile than Sinbon Electronics Co. It trades about 0.03 of its potential returns per unit of risk. Sinbon Electronics Co is currently generating about 0.02 per unit of risk. If you would invest 54,500 in Elite Material Co on November 3, 2024 and sell it today you would earn a total of 6,900 from holding Elite Material Co or generate 12.66% 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. Sinbon Electronics Co
Performance |
| Timeline |
| Elite Material |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Solid
| Sinbon Electronics |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Weak
Elite Material and Sinbon Electronics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Elite Material and Sinbon Electronics
The main advantage of trading using opposite Elite Material and Sinbon Electronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Elite Material position performs unexpectedly, Sinbon 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 Sinbon Electronics will offset losses from the drop in Sinbon Electronics' long position.The idea behind Elite Material Co and Sinbon Electronics Co 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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