Correlation Between ELMOS SEMICONDUCTOR and TT Electronics
Can any of the company-specific risk be diversified away by investing in both ELMOS SEMICONDUCTOR and TT 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 ELMOS SEMICONDUCTOR and TT Electronics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ELMOS SEMICONDUCTOR and TT Electronics PLC, you can compare the effects of market volatilities on ELMOS SEMICONDUCTOR and TT 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 ELMOS SEMICONDUCTOR with a short position of TT Electronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of ELMOS SEMICONDUCTOR and TT Electronics.
Diversification Opportunities for ELMOS SEMICONDUCTOR and TT Electronics
0.17 | Correlation Coefficient |
Average diversification
The 3 months correlation between ELMOS and 7TT is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding ELMOS SEMICONDUCTOR and TT Electronics PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TT Electronics PLC and ELMOS SEMICONDUCTOR 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 ELMOS SEMICONDUCTOR are associated (or correlated) with TT Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TT Electronics PLC has no effect on the direction of ELMOS SEMICONDUCTOR i.e., ELMOS SEMICONDUCTOR and TT Electronics go up and down completely randomly.
Pair Corralation between ELMOS SEMICONDUCTOR and TT Electronics
Assuming the 90 days trading horizon ELMOS SEMICONDUCTOR is expected to generate 0.61 times more return on investment than TT Electronics. However, ELMOS SEMICONDUCTOR is 1.64 times less risky than TT Electronics. It trades about -0.03 of its potential returns per unit of risk. TT Electronics PLC is currently generating about -0.04 per unit of risk. If you would invest 7,940 in ELMOS SEMICONDUCTOR on September 21, 2024 and sell it today you would lose (1,030) from holding ELMOS SEMICONDUCTOR or give up 12.97% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
ELMOS SEMICONDUCTOR vs. TT Electronics PLC
Performance |
| Timeline |
| ELMOS SEMICONDUCTOR |
| TT Electronics PLC |
ELMOS SEMICONDUCTOR and TT Electronics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ELMOS SEMICONDUCTOR and TT Electronics
The main advantage of trading using opposite ELMOS SEMICONDUCTOR and TT Electronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ELMOS SEMICONDUCTOR position performs unexpectedly, TT 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 TT Electronics will offset losses from the drop in TT Electronics' long position.The idea behind ELMOS SEMICONDUCTOR and TT Electronics PLC 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.| TT Electronics vs. Apple Inc | TT Electronics vs. Apple Inc | TT Electronics vs. Apple Inc | TT Electronics vs. Apple Inc |
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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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