Correlation Between Elite Material and Daxin Materials
Can any of the company-specific risk be diversified away by investing in both Elite Material and Daxin Materials 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 Daxin Materials 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 Daxin Materials Corp, you can compare the effects of market volatilities on Elite Material and Daxin Materials 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 Daxin Materials. Check out your portfolio center. Please also check ongoing floating volatility patterns of Elite Material and Daxin Materials.
Diversification Opportunities for Elite Material and Daxin Materials
-0.3 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Elite and Daxin is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Elite Material Co and Daxin Materials Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Daxin Materials Corp 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 Daxin Materials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Daxin Materials Corp has no effect on the direction of Elite Material i.e., Elite Material and Daxin Materials go up and down completely randomly.
Pair Corralation between Elite Material and Daxin Materials
Assuming the 90 days trading horizon Elite Material Co is expected to generate 0.61 times more return on investment than Daxin Materials. However, Elite Material Co is 1.65 times less risky than Daxin Materials. It trades about 0.06 of its potential returns per unit of risk. Daxin Materials Corp is currently generating about -0.02 per unit of risk. If you would invest 44,700 in Elite Material Co on August 30, 2024 and sell it today you would earn a total of 2,050 from holding Elite Material Co or generate 4.59% 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. Daxin Materials Corp
Performance |
| Timeline |
| Elite Material |
| Daxin Materials Corp |
Elite Material and Daxin Materials Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Elite Material and Daxin Materials
The main advantage of trading using opposite Elite Material and Daxin Materials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Elite Material position performs unexpectedly, Daxin Materials 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 Daxin Materials will offset losses from the drop in Daxin Materials' long position.The idea behind Elite Material Co and Daxin Materials Corp 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.| Daxin Materials vs. Topco Scientific Co | Daxin Materials vs. Holtek Semiconductor | Daxin Materials vs. Greatek Electronics | Daxin Materials vs. Stark Technology |
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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
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