Correlation Between Elan Microelectronics and Asia Vital
Can any of the company-specific risk be diversified away by investing in both Elan Microelectronics and Asia Vital 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 Asia Vital 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 Asia Vital Components, you can compare the effects of market volatilities on Elan Microelectronics and Asia Vital 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 Asia Vital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Elan Microelectronics and Asia Vital.
Diversification Opportunities for Elan Microelectronics and Asia Vital
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Elan and Asia is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Elan Microelectronics Corp and Asia Vital Components in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Asia Vital Components 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 Asia Vital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Asia Vital Components has no effect on the direction of Elan Microelectronics i.e., Elan Microelectronics and Asia Vital go up and down completely randomly.
Pair Corralation between Elan Microelectronics and Asia Vital
Assuming the 90 days trading horizon Elan Microelectronics Corp is expected to under-perform the Asia Vital. But the stock apears to be less risky and, when comparing its historical volatility, Elan Microelectronics Corp is 1.78 times less risky than Asia Vital. The stock trades about -0.04 of its potential returns per unit of risk. The Asia Vital Components is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest 73,600 in Asia Vital Components on September 1, 2024 and sell it today you would lose (9,300) from holding Asia Vital Components or give up 12.64% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.22% |
| Values | Daily Returns |
Elan Microelectronics Corp vs. Asia Vital Components
Performance |
| Timeline |
| Elan Microelectronics |
| Asia Vital Components |
Elan Microelectronics and Asia Vital Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Elan Microelectronics and Asia Vital
The main advantage of trading using opposite Elan Microelectronics and Asia Vital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Elan Microelectronics position performs unexpectedly, Asia Vital 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 Asia Vital will offset losses from the drop in Asia Vital's long position.The idea behind Elan Microelectronics Corp and Asia Vital Components 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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