Correlation Between Everlight Electronics and China Times
Can any of the company-specific risk be diversified away by investing in both Everlight Electronics and China Times 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 Everlight Electronics and China Times into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Everlight Electronics Co and China Times Publishing, you can compare the effects of market volatilities on Everlight Electronics and China Times 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 Everlight Electronics with a short position of China Times. Check out your portfolio center. Please also check ongoing floating volatility patterns of Everlight Electronics and China Times.
Diversification Opportunities for Everlight Electronics and China Times
0.57 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Everlight and China is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Everlight Electronics Co and China Times Publishing in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Times Publishing and Everlight Electronics 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 Everlight Electronics Co are associated (or correlated) with China Times. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Times Publishing has no effect on the direction of Everlight Electronics i.e., Everlight Electronics and China Times go up and down completely randomly.
Pair Corralation between Everlight Electronics and China Times
Assuming the 90 days trading horizon Everlight Electronics is expected to generate 1.49 times less return on investment than China Times. In addition to that, Everlight Electronics is 1.01 times more volatile than China Times Publishing. It trades about 0.07 of its total potential returns per unit of risk. China Times Publishing is currently generating about 0.1 per unit of volatility. If you would invest 1,925 in China Times Publishing on November 8, 2024 and sell it today you would earn a total of 70.00 from holding China Times Publishing or generate 3.64% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Everlight Electronics Co vs. China Times Publishing
Performance |
| Timeline |
| Everlight Electronics |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Weak
| China Times Publishing |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Insignificant
Everlight Electronics and China Times Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Everlight Electronics and China Times
The main advantage of trading using opposite Everlight Electronics and China Times positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Everlight Electronics position performs unexpectedly, China Times 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 China Times will offset losses from the drop in China Times' long position.The idea behind Everlight Electronics Co and China Times Publishing 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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