Correlation Between Elan Microelectronics and Test Research
Can any of the company-specific risk be diversified away by investing in both Elan Microelectronics and Test Research 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 Test Research 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 Test Research, you can compare the effects of market volatilities on Elan Microelectronics and Test Research 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 Test Research. Check out your portfolio center. Please also check ongoing floating volatility patterns of Elan Microelectronics and Test Research.
Diversification Opportunities for Elan Microelectronics and Test Research
-0.04 | Correlation Coefficient |
Good diversification
The 3 months correlation between Elan and Test is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding Elan Microelectronics Corp and Test Research in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Test Research 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 Test Research. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Test Research has no effect on the direction of Elan Microelectronics i.e., Elan Microelectronics and Test Research go up and down completely randomly.
Pair Corralation between Elan Microelectronics and Test Research
Assuming the 90 days trading horizon Elan Microelectronics Corp is expected to generate 0.68 times more return on investment than Test Research. However, Elan Microelectronics Corp is 1.46 times less risky than Test Research. It trades about 0.02 of its potential returns per unit of risk. Test Research is currently generating about -0.02 per unit of risk. If you would invest 14,600 in Elan Microelectronics Corp on September 1, 2024 and sell it today you would earn a total of 50.00 from holding Elan Microelectronics Corp or generate 0.34% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.65% |
| Values | Daily Returns |
Elan Microelectronics Corp vs. Test Research
Performance |
| Timeline |
| Elan Microelectronics |
| Test Research |
Elan Microelectronics and Test Research Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Elan Microelectronics and Test Research
The main advantage of trading using opposite Elan Microelectronics and Test Research positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Elan Microelectronics position performs unexpectedly, Test Research 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 Test Research will offset losses from the drop in Test Research's long position.The idea behind Elan Microelectronics Corp and Test Research 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
Other Complementary Tools
| Share Portfolio Track or share privately all of your investments from the convenience of any device | |
| Pair Correlation Compare performance and examine fundamental relationship between any two equity instruments | |
| Bond Analysis Evaluate and analyze corporate bonds as a potential investment for your portfolios. | |
| FinTech Suite Use AI to screen and filter profitable investment opportunities | |
| Top Crypto Exchanges Search and analyze digital assets across top global cryptocurrency exchanges |