Correlation Between STL Technology and Prime Electronics
Can any of the company-specific risk be diversified away by investing in both STL Technology and Prime Electronics 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 STL Technology and Prime Electronics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between STL Technology Co and Prime Electronics Satellitics, you can compare the effects of market volatilities on STL Technology and Prime Electronics 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 STL Technology with a short position of Prime Electronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of STL Technology and Prime Electronics.
Diversification Opportunities for STL Technology and Prime Electronics
-0.66 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between STL and Prime is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding STL Technology Co and Prime Electronics Satellitics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prime Electronics and STL 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 STL Technology Co are associated (or correlated) with Prime Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prime Electronics has no effect on the direction of STL Technology i.e., STL Technology and Prime Electronics go up and down completely randomly.
Pair Corralation between STL Technology and Prime Electronics
Assuming the 90 days trading horizon STL Technology Co is expected to generate 0.96 times more return on investment than Prime Electronics. However, STL Technology Co is 1.04 times less risky than Prime Electronics. It trades about 0.05 of its potential returns per unit of risk. Prime Electronics Satellitics is currently generating about 0.04 per unit of risk. If you would invest 3,990 in STL Technology Co on September 3, 2024 and sell it today you would earn a total of 2,060 from holding STL Technology Co or generate 51.63% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
STL Technology Co vs. Prime Electronics Satellitics
Performance |
| Timeline |
| STL Technology |
| Prime Electronics |
STL Technology and Prime Electronics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with STL Technology and Prime Electronics
The main advantage of trading using opposite STL Technology and Prime Electronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if STL Technology position performs unexpectedly, Prime Electronics 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 Prime Electronics will offset losses from the drop in Prime Electronics' long position.| STL Technology vs. Eclat Textile Co | STL Technology vs. WiseChip Semiconductor | STL Technology vs. Novatek Microelectronics Corp | STL Technology vs. Leader Electronics |
| Prime Electronics vs. Taiwan Semiconductor Manufacturing | Prime Electronics vs. Yang Ming Marine | Prime Electronics vs. ASE Industrial Holding | Prime Electronics 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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