Correlation Between Action Electronics and Loop Telecommunicatio
Can any of the company-specific risk be diversified away by investing in both Action Electronics and Loop Telecommunicatio 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 Action Electronics and Loop Telecommunicatio into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Action Electronics Co and Loop Telecommunication International, you can compare the effects of market volatilities on Action Electronics and Loop Telecommunicatio 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 Action Electronics with a short position of Loop Telecommunicatio. Check out your portfolio center. Please also check ongoing floating volatility patterns of Action Electronics and Loop Telecommunicatio.
Diversification Opportunities for Action Electronics and Loop Telecommunicatio
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Action and Loop is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Action Electronics Co and Loop Telecommunication Interna in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Loop Telecommunication and Action 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 Action Electronics Co are associated (or correlated) with Loop Telecommunicatio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Loop Telecommunication has no effect on the direction of Action Electronics i.e., Action Electronics and Loop Telecommunicatio go up and down completely randomly.
Pair Corralation between Action Electronics and Loop Telecommunicatio
Assuming the 90 days trading horizon Action Electronics Co is expected to generate 1.7 times more return on investment than Loop Telecommunicatio. However, Action Electronics is 1.7 times more volatile than Loop Telecommunication International. It trades about 0.19 of its potential returns per unit of risk. Loop Telecommunication International is currently generating about 0.06 per unit of risk. If you would invest 1,745 in Action Electronics Co on November 28, 2024 and sell it today you would earn a total of 110.00 from holding Action Electronics Co or generate 6.3% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Action Electronics Co vs. Loop Telecommunication Interna
Performance |
| Timeline |
| Action Electronics |
| Loop Telecommunication |
Action Electronics and Loop Telecommunicatio Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Action Electronics and Loop Telecommunicatio
The main advantage of trading using opposite Action Electronics and Loop Telecommunicatio positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Action Electronics position performs unexpectedly, Loop Telecommunicatio 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 Loop Telecommunicatio will offset losses from the drop in Loop Telecommunicatio's long position.| Action Electronics vs. Amtran Technology Co | Action Electronics vs. Asia Optical Co | Action Electronics vs. Emerging Display Technologies | Action Electronics vs. Bright Led Electronics |
| Loop Telecommunicatio vs. Edimax Technology Co | Loop Telecommunicatio vs. Billion Electric Co | Loop Telecommunicatio vs. CyberTAN Technology | Loop Telecommunicatio vs. Emerging Display Technologies |
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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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