Correlation Between Elan Microelectronics and Song Shang
Can any of the company-specific risk be diversified away by investing in both Elan Microelectronics and Song Shang 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 Elan Microelectronics and Song Shang into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Elan Microelectronics Corp and Song Shang Electronics, you can compare the effects of market volatilities on Elan Microelectronics and Song Shang 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 Elan Microelectronics with a short position of Song Shang. Check out your portfolio center. Please also check ongoing floating volatility patterns of Elan Microelectronics and Song Shang.
Diversification Opportunities for Elan Microelectronics and Song Shang
-0.16 | Correlation Coefficient |
Good diversification
The 3 months correlation between Elan and Song is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Elan Microelectronics Corp and Song Shang Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Song Shang Electronics and Elan 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 Elan Microelectronics Corp are associated (or correlated) with Song Shang. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Song Shang Electronics has no effect on the direction of Elan Microelectronics i.e., Elan Microelectronics and Song Shang go up and down completely randomly.
Pair Corralation between Elan Microelectronics and Song Shang
Assuming the 90 days trading horizon Elan Microelectronics Corp is expected to generate 0.47 times more return on investment than Song Shang. However, Elan Microelectronics Corp is 2.11 times less risky than Song Shang. It trades about 0.04 of its potential returns per unit of risk. Song Shang Electronics is currently generating about -0.01 per unit of risk. If you would invest 14,950 in Elan Microelectronics Corp on September 16, 2024 and sell it today you would earn a total of 500.00 from holding Elan Microelectronics Corp or generate 3.34% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
Elan Microelectronics Corp vs. Song Shang Electronics
Performance |
Timeline |
Elan Microelectronics |
Song Shang Electronics |
Elan Microelectronics and Song Shang Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Elan Microelectronics and Song Shang
The main advantage of trading using opposite Elan Microelectronics and Song Shang positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Elan Microelectronics position performs unexpectedly, Song Shang 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 Song Shang will offset losses from the drop in Song Shang's long position.Elan Microelectronics vs. AU Optronics | ||
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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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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