Correlation Between Elan Microelectronics and Radiant Opto

Can any of the company-specific risk be diversified away by investing in both Elan Microelectronics and Radiant Opto 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 Radiant Opto 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 Radiant Opto Electronics Corp, you can compare the effects of market volatilities on Elan Microelectronics and Radiant Opto 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 Radiant Opto. Check out your portfolio center. Please also check ongoing floating volatility patterns of Elan Microelectronics and Radiant Opto.

Diversification Opportunities for Elan Microelectronics and Radiant Opto

0.15

Correlation Coefficient

Elan Microelectronics  Radiant Opto

Average diversification

The 3 months correlation between Elan and Radiant is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Elan Microelectronics Corp and Radiant Opto Electronics Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Radiant Opto Electro 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 Radiant Opto. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Radiant Opto Electro has no effect on the direction of Elan Microelectronics i.e., Elan Microelectronics and Radiant Opto go up and down completely randomly.

Pair Corralation between Elan Microelectronics and Radiant Opto

Assuming the 90 days trading horizon Elan Microelectronics is expected to generate 1.92 times less return on investment than Radiant Opto. In addition to that, Elan Microelectronics is 1.11 times more volatile than Radiant Opto Electronics Corp. It trades about 0.02 of its total potential returns per unit of risk. Radiant Opto Electronics Corp is currently generating about 0.04 per unit of volatility. If you would invest  19,250  in Radiant Opto Electronics Corp on September 23, 2024 and sell it today you would earn a total of  650.00  from holding Radiant Opto Electronics Corp or generate 3.38% return on investment over 90 days.

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

Elan Microelectronics Corp  vs.  Radiant Opto Electronics Corp

Elan Microelectronics

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Elan Microelectronics Corp are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Elan Microelectronics is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Radiant Opto Electro

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Radiant Opto Electronics Corp are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Radiant Opto is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Elan Microelectronics and Radiant Opto

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

The idea behind Elan Microelectronics Corp and Radiant Opto Electronics Corp 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..