Correlation Between Elan Microelectronics and Hitron Technologies
Can any of the company-specific risk be diversified away by investing in both Elan Microelectronics and Hitron Technologies 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 Elan Microelectronics and Hitron Technologies into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Elan Microelectronics Corp and Hitron Technologies, you can compare the effects of market volatilities on Elan Microelectronics and Hitron Technologies 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 Elan Microelectronics with a short position of Hitron Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Elan Microelectronics and Hitron Technologies.
Diversification Opportunities for Elan Microelectronics and Hitron Technologies
0.44 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Elan and Hitron is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Elan Microelectronics Corp and Hitron Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hitron Technologies and Elan Microelectronics 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 Elan Microelectronics Corp are associated (or correlated) with Hitron Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hitron Technologies has no effect on the direction of Elan Microelectronics i.e., Elan Microelectronics and Hitron Technologies go up and down completely randomly.
Pair Corralation between Elan Microelectronics and Hitron Technologies
Assuming the 90 days trading horizon Elan Microelectronics is expected to generate 12.74 times less return on investment than Hitron Technologies. But when comparing it to its historical volatility, Elan Microelectronics Corp is 1.52 times less risky than Hitron Technologies. It trades about 0.02 of its potential returns per unit of risk. Hitron Technologies is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest 3,150 in Hitron Technologies on September 1, 2024 and sell it today you would earn a total of 365.00 from holding Hitron Technologies or generate 11.59% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
Elan Microelectronics Corp vs. Hitron Technologies
Performance |
| Timeline |
| Elan Microelectronics |
| Hitron Technologies |
Elan Microelectronics and Hitron Technologies Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Elan Microelectronics and Hitron Technologies
The main advantage of trading using opposite Elan Microelectronics and Hitron Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Elan Microelectronics position performs unexpectedly, Hitron Technologies 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 Hitron Technologies will offset losses from the drop in Hitron Technologies' long position.The idea behind Elan Microelectronics Corp and Hitron Technologies 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..
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