Correlation Between Innolux Corp and Excellence Optoelectronic
Can any of the company-specific risk be diversified away by investing in both Innolux Corp and Excellence Optoelectronic 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 Innolux Corp and Excellence Optoelectronic into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Innolux Corp and Excellence Optoelectronic, you can compare the effects of market volatilities on Innolux Corp and Excellence Optoelectronic 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 Innolux Corp with a short position of Excellence Optoelectronic. Check out your portfolio center. Please also check ongoing floating volatility patterns of Innolux Corp and Excellence Optoelectronic.
Diversification Opportunities for Innolux Corp and Excellence Optoelectronic
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Innolux and Excellence is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Innolux Corp and Excellence Optoelectronic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Excellence Optoelectronic and Innolux Corp 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 Innolux Corp are associated (or correlated) with Excellence Optoelectronic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Excellence Optoelectronic has no effect on the direction of Innolux Corp i.e., Innolux Corp and Excellence Optoelectronic go up and down completely randomly.
Pair Corralation between Innolux Corp and Excellence Optoelectronic
Assuming the 90 days trading horizon Innolux Corp is expected to generate 0.97 times more return on investment than Excellence Optoelectronic. However, Innolux Corp is 1.03 times less risky than Excellence Optoelectronic. It trades about 0.02 of its potential returns per unit of risk. Excellence Optoelectronic is currently generating about -0.02 per unit of risk. If you would invest 1,300 in Innolux Corp on November 5, 2024 and sell it today you would earn a total of 105.00 from holding Innolux Corp or generate 8.08% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Innolux Corp vs. Excellence Optoelectronic
Performance |
| Timeline |
| Innolux Corp |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| Excellence Optoelectronic |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Innolux Corp and Excellence Optoelectronic Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Innolux Corp and Excellence Optoelectronic
The main advantage of trading using opposite Innolux Corp and Excellence Optoelectronic positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Innolux Corp position performs unexpectedly, Excellence Optoelectronic 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 Excellence Optoelectronic will offset losses from the drop in Excellence Optoelectronic's long position.The idea behind Innolux Corp and Excellence Optoelectronic 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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