Correlation Between Faraday Technology and Elan Microelectronics
Can any of the company-specific risk be diversified away by investing in both Faraday Technology and Elan Microelectronics 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 Faraday Technology and Elan Microelectronics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Faraday Technology Corp and Elan Microelectronics Corp, you can compare the effects of market volatilities on Faraday Technology and Elan Microelectronics 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 Faraday Technology with a short position of Elan Microelectronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Faraday Technology and Elan Microelectronics.
Diversification Opportunities for Faraday Technology and Elan Microelectronics
0.59 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Faraday and Elan is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Faraday Technology Corp and Elan Microelectronics Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Elan Microelectronics and Faraday Technology 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 Faraday Technology Corp are associated (or correlated) with Elan Microelectronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Elan Microelectronics has no effect on the direction of Faraday Technology i.e., Faraday Technology and Elan Microelectronics go up and down completely randomly.
Pair Corralation between Faraday Technology and Elan Microelectronics
Assuming the 90 days trading horizon Faraday Technology Corp is expected to under-perform the Elan Microelectronics. In addition to that, Faraday Technology is 1.23 times more volatile than Elan Microelectronics Corp. It trades about -0.07 of its total potential returns per unit of risk. Elan Microelectronics Corp is currently generating about -0.01 per unit of volatility. If you would invest 15,250 in Elan Microelectronics Corp on October 26, 2024 and sell it today you would lose (450.00) from holding Elan Microelectronics Corp or give up 2.95% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Faraday Technology Corp vs. Elan Microelectronics Corp
Performance |
| Timeline |
| Faraday Technology Corp |
| Elan Microelectronics |
Faraday Technology and Elan Microelectronics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Faraday Technology and Elan Microelectronics
The main advantage of trading using opposite Faraday Technology and Elan Microelectronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Faraday Technology position performs unexpectedly, Elan Microelectronics 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 Elan Microelectronics will offset losses from the drop in Elan Microelectronics' long position.| Faraday Technology vs. Global Unichip Corp | Faraday Technology vs. Novatek Microelectronics Corp | Faraday Technology vs. Realtek Semiconductor Corp | Faraday Technology vs. Unimicron Technology Corp |
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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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