Correlation Between Eltek and Sanmina
Can any of the company-specific risk be diversified away by investing in both Eltek and Sanmina 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 Eltek and Sanmina into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Eltek and Sanmina, you can compare the effects of market volatilities on Eltek and Sanmina 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 Eltek with a short position of Sanmina. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eltek and Sanmina.
Diversification Opportunities for Eltek and Sanmina
Very weak diversification
The 3 months correlation between Eltek and Sanmina is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Eltek and Sanmina in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sanmina and Eltek 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 Eltek are associated (or correlated) with Sanmina. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sanmina has no effect on the direction of Eltek i.e., Eltek and Sanmina go up and down completely randomly.
Pair Corralation between Eltek and Sanmina
Given the investment horizon of 90 days Eltek is expected to generate 3.92 times less return on investment than Sanmina. But when comparing it to its historical volatility, Eltek is 1.61 times less risky than Sanmina. It trades about 0.12 of its potential returns per unit of risk. Sanmina is currently generating about 0.29 of returns per unit of risk over similar time horizon. If you would invest 6,540 in Sanmina on August 24, 2024 and sell it today you would earn a total of 1,412 from holding Sanmina or generate 21.59% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Eltek vs. Sanmina
Performance |
| Timeline |
| Eltek |
| Sanmina |
Eltek and Sanmina Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Eltek and Sanmina
The main advantage of trading using opposite Eltek and Sanmina positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Eltek position performs unexpectedly, Sanmina 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 Sanmina will offset losses from the drop in Sanmina's long position.The idea behind Eltek and Sanmina 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.| Sanmina vs. Benchmark Electronics | Sanmina vs. Methode Electronics | Sanmina vs. OSI Systems | Sanmina vs. Celestica |
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 Transaction History module to view history of all your transactions and understand their impact on performance.
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