Correlation Between Century Wind and Excellence Optoelectronic

Can any of the company-specific risk be diversified away by investing in both Century Wind and Excellence Optoelectronic 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 Century Wind and Excellence Optoelectronic into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Century Wind Power and Excellence Optoelectronic, you can compare the effects of market volatilities on Century Wind and Excellence Optoelectronic 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 Century Wind with a short position of Excellence Optoelectronic. Check out your portfolio center. Please also check ongoing floating volatility patterns of Century Wind and Excellence Optoelectronic.

Diversification Opportunities for Century Wind and Excellence Optoelectronic

-0.65

Correlation Coefficient

Century Wind  Excellence Optoelectronic

Excellent diversification

The 3 months correlation between Century and Excellence is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Century Wind Power and Excellence Optoelectronic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Excellence Optoelectronic and Century Wind 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 Century Wind Power are associated (or correlated) with Excellence Optoelectronic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Excellence Optoelectronic has no effect on the direction of Century Wind i.e., Century Wind and Excellence Optoelectronic go up and down completely randomly.

Pair Corralation between Century Wind and Excellence Optoelectronic

Assuming the 90 days trading horizon Century Wind Power is expected to under-perform the Excellence Optoelectronic. But the stock apears to be less risky and, when comparing its historical volatility, Century Wind Power is 2.75 times less risky than Excellence Optoelectronic. The stock trades about -0.04 of its potential returns per unit of risk. The Excellence Optoelectronic is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  2,490  in Excellence Optoelectronic on September 4, 2024 and sell it today you would earn a total of  420.00  from holding Excellence Optoelectronic or generate 16.87% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	12.7%
Values	Daily Returns

Century Wind Power  vs.  Excellence Optoelectronic

Century Wind Power

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Century Wind Power has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Century Wind is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Excellence Optoelectronic

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Excellence Optoelectronic are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Excellence Optoelectronic showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Century Wind and Excellence Optoelectronic

The main advantage of trading using opposite Century Wind and Excellence Optoelectronic positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Century Wind position performs unexpectedly, Excellence Optoelectronic 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 Excellence Optoelectronic will offset losses from the drop in Excellence Optoelectronic's long position.

The idea behind Century Wind Power and Excellence Optoelectronic 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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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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.