Correlation Between Para Light and Grand Plastic
Can any of the company-specific risk be diversified away by investing in both Para Light and Grand Plastic 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 Para Light and Grand Plastic into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Para Light Electronics and Grand Plastic Technology, you can compare the effects of market volatilities on Para Light and Grand Plastic 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 Para Light with a short position of Grand Plastic. Check out your portfolio center. Please also check ongoing floating volatility patterns of Para Light and Grand Plastic.
Diversification Opportunities for Para Light and Grand Plastic
0.01 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Para and Grand is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Para Light Electronics and Grand Plastic Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Grand Plastic Technology and Para Light 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 Para Light Electronics are associated (or correlated) with Grand Plastic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Grand Plastic Technology has no effect on the direction of Para Light i.e., Para Light and Grand Plastic go up and down completely randomly.
Pair Corralation between Para Light and Grand Plastic
Assuming the 90 days trading horizon Para Light Electronics is expected to under-perform the Grand Plastic. But the stock apears to be less risky and, when comparing its historical volatility, Para Light Electronics is 2.17 times less risky than Grand Plastic. The stock trades about -0.01 of its potential returns per unit of risk. The Grand Plastic Technology is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest 22,839 in Grand Plastic Technology on August 30, 2024 and sell it today you would earn a total of 141,661 from holding Grand Plastic Technology or generate 620.26% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Para Light Electronics vs. Grand Plastic Technology
Performance |
| Timeline |
| Para Light Electronics |
| Grand Plastic Technology |
Para Light and Grand Plastic Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Para Light and Grand Plastic
The main advantage of trading using opposite Para Light and Grand Plastic positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Para Light position performs unexpectedly, Grand Plastic 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 Grand Plastic will offset losses from the drop in Grand Plastic's long position.The idea behind Para Light Electronics and Grand Plastic 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.| Grand Plastic vs. Sino American Silicon Products | Grand Plastic vs. Powertech Technology | Grand Plastic vs. Formosa Sumco Technology | Grand Plastic vs. Radiant Opto Electronics 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.
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