Correlation Between Newretail and Elite Material
Can any of the company-specific risk be diversified away by investing in both Newretail and Elite Material 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 Newretail and Elite Material into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Newretail Co and Elite Material Co, you can compare the effects of market volatilities on Newretail and Elite Material 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 Newretail with a short position of Elite Material. Check out your portfolio center. Please also check ongoing floating volatility patterns of Newretail and Elite Material.
Diversification Opportunities for Newretail and Elite Material
-0.33 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Newretail and Elite is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Newretail Co and Elite Material Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Elite Material and Newretail 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 Newretail Co are associated (or correlated) with Elite Material. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Elite Material has no effect on the direction of Newretail i.e., Newretail and Elite Material go up and down completely randomly.
Pair Corralation between Newretail and Elite Material
Assuming the 90 days trading horizon Newretail Co is expected to generate 1.63 times more return on investment than Elite Material. However, Newretail is 1.63 times more volatile than Elite Material Co. It trades about 0.11 of its potential returns per unit of risk. Elite Material Co is currently generating about 0.05 per unit of risk. If you would invest 1,480 in Newretail Co on September 3, 2024 and sell it today you would earn a total of 1,000.00 from holding Newretail Co or generate 67.57% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Newretail Co vs. Elite Material Co
Performance |
| Timeline |
| Newretail |
| Elite Material |
Newretail and Elite Material Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Newretail and Elite Material
The main advantage of trading using opposite Newretail and Elite Material positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Newretail position performs unexpectedly, Elite Material 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 Elite Material will offset losses from the drop in Elite Material's long position.| Newretail vs. President Chain Store | Newretail vs. Uni President Enterprises Corp | Newretail vs. Taiwan FamilyMart Co | Newretail vs. Eclat Textile Co |
| Elite Material vs. Taiwan Semiconductor Manufacturing | Elite Material vs. Yang Ming Marine | Elite Material vs. ASE Industrial Holding | Elite Material vs. AU Optronics |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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