Correlation Between Faraday Technology and Etron Technology
Can any of the company-specific risk be diversified away by investing in both Faraday Technology and Etron Technology 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 Etron Technology 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 Etron Technology, you can compare the effects of market volatilities on Faraday Technology and Etron Technology 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 Etron Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Faraday Technology and Etron Technology.
Diversification Opportunities for Faraday Technology and Etron Technology
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Faraday and Etron is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Faraday Technology Corp and Etron Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Etron Technology 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 Etron Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Etron Technology has no effect on the direction of Faraday Technology i.e., Faraday Technology and Etron Technology go up and down completely randomly.
Pair Corralation between Faraday Technology and Etron Technology
Assuming the 90 days trading horizon Faraday Technology Corp is expected to under-perform the Etron Technology. In addition to that, Faraday Technology is 1.14 times more volatile than Etron Technology. It trades about -0.09 of its total potential returns per unit of risk. Etron Technology is currently generating about -0.06 per unit of volatility. If you would invest 3,810 in Etron Technology on November 2, 2024 and sell it today you would lose (575.00) from holding Etron Technology or give up 15.09% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Faraday Technology Corp vs. Etron Technology
Performance |
| Timeline |
| Faraday Technology Corp |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| Etron Technology |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Faraday Technology and Etron Technology Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Faraday Technology and Etron Technology
The main advantage of trading using opposite Faraday Technology and Etron Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Faraday Technology position performs unexpectedly, Etron Technology 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 Etron Technology will offset losses from the drop in Etron Technology's long position.The idea behind Faraday Technology Corp and Etron Technology 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 Transaction History module to view history of all your transactions and understand their impact on performance.
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