Correlation Between SDI Corp and Excellence Optoelectronic

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

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

Diversification Opportunities for SDI Corp and Excellence Optoelectronic

-0.39

Correlation Coefficient

SDI Corp  Excellence Optoelectronic

Very good diversification

The 3 months correlation between SDI and Excellence is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding SDI Corp and Excellence Optoelectronic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Excellence Optoelectronic and SDI Corp 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 SDI Corp 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 SDI Corp i.e., SDI Corp and Excellence Optoelectronic go up and down completely randomly.

Pair Corralation between SDI Corp and Excellence Optoelectronic

Assuming the 90 days trading horizon SDI Corp is expected to under-perform the Excellence Optoelectronic. But the stock apears to be less risky and, when comparing its historical volatility, SDI Corp is 1.13 times less risky than Excellence Optoelectronic. The stock trades about -0.12 of its potential returns per unit of risk. The Excellence Optoelectronic is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  2,630  in Excellence Optoelectronic on September 2, 2024 and sell it today you would earn a total of  310.00  from holding Excellence Optoelectronic or generate 11.79% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

SDI Corp  vs.  Excellence Optoelectronic

SDI Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SDI Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Excellence Optoelectronic

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Excellence Optoelectronic are ranked lower than 5 (%) 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 SDI Corp and Excellence Optoelectronic

The main advantage of trading using opposite SDI Corp and Excellence Optoelectronic positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SDI Corp 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 SDI Corp 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.