Correlation Between Elan Microelectronics and Greatek Electronics
Can any of the company-specific risk be diversified away by investing in both Elan Microelectronics 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 Elan Microelectronics and Greatek Electronics 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 Greatek Electronics, you can compare the effects of market volatilities on Elan Microelectronics 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 Elan Microelectronics with a short position of Greatek Electronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Elan Microelectronics and Greatek Electronics.
Diversification Opportunities for Elan Microelectronics and Greatek Electronics
-0.14 | Correlation Coefficient |
Good diversification
The 3 months correlation between Elan and Greatek is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Elan Microelectronics Corp and Greatek Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Greatek Electronics 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 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 Elan Microelectronics i.e., Elan Microelectronics and Greatek Electronics go up and down completely randomly.
Pair Corralation between Elan Microelectronics and Greatek Electronics
Assuming the 90 days trading horizon Elan Microelectronics Corp is expected to generate 1.85 times more return on investment than Greatek Electronics. However, Elan Microelectronics is 1.85 times more volatile than Greatek Electronics. It trades about -0.03 of its potential returns per unit of risk. Greatek Electronics is currently generating about -0.06 per unit of risk. If you would invest 15,250 in Elan Microelectronics Corp on August 28, 2024 and sell it today you would lose (250.00) from holding Elan Microelectronics Corp or give up 1.64% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Elan Microelectronics Corp vs. Greatek Electronics
Performance |
| Timeline |
| Elan Microelectronics |
| Greatek Electronics |
Elan Microelectronics and Greatek Electronics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Elan Microelectronics and Greatek Electronics
The main advantage of trading using opposite Elan Microelectronics and Greatek Electronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Elan Microelectronics 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.The idea behind Elan Microelectronics Corp and Greatek Electronics 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.
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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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.
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