Correlation Between CoAsia Microelectronics and Highlight Tech
Can any of the company-specific risk be diversified away by investing in both CoAsia Microelectronics and Highlight Tech 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 CoAsia Microelectronics and Highlight Tech into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CoAsia Microelectronics and Highlight Tech, you can compare the effects of market volatilities on CoAsia Microelectronics and Highlight Tech 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 CoAsia Microelectronics with a short position of Highlight Tech. Check out your portfolio center. Please also check ongoing floating volatility patterns of CoAsia Microelectronics and Highlight Tech.
Diversification Opportunities for CoAsia Microelectronics and Highlight Tech
0.12 | Correlation Coefficient |
Average diversification
The 3 months correlation between CoAsia and Highlight is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding CoAsia Microelectronics and Highlight Tech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Highlight Tech and CoAsia Microelectronics 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 CoAsia Microelectronics are associated (or correlated) with Highlight Tech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Highlight Tech has no effect on the direction of CoAsia Microelectronics i.e., CoAsia Microelectronics and Highlight Tech go up and down completely randomly.
Pair Corralation between CoAsia Microelectronics and Highlight Tech
Assuming the 90 days trading horizon CoAsia Microelectronics is expected to generate 1.46 times more return on investment than Highlight Tech. However, CoAsia Microelectronics is 1.46 times more volatile than Highlight Tech. It trades about 0.12 of its potential returns per unit of risk. Highlight Tech is currently generating about 0.02 per unit of risk. If you would invest 1,470 in CoAsia Microelectronics on September 4, 2024 and sell it today you would earn a total of 2,420 from holding CoAsia Microelectronics or generate 164.63% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
CoAsia Microelectronics vs. Highlight Tech
Performance |
| Timeline |
| CoAsia Microelectronics |
| Highlight Tech |
CoAsia Microelectronics and Highlight Tech Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CoAsia Microelectronics and Highlight Tech
The main advantage of trading using opposite CoAsia Microelectronics and Highlight Tech positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CoAsia Microelectronics position performs unexpectedly, Highlight Tech 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 Highlight Tech will offset losses from the drop in Highlight Tech's long position.The idea behind CoAsia Microelectronics and Highlight Tech 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.
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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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