Correlation Between Elite Semiconductor and Founding Construction

Can any of the company-specific risk be diversified away by investing in both Elite Semiconductor and Founding Construction 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 Elite Semiconductor and Founding Construction into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Elite Semiconductor Memory and Founding Construction Development, you can compare the effects of market volatilities on Elite Semiconductor and Founding Construction 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 Elite Semiconductor with a short position of Founding Construction. Check out your portfolio center. Please also check ongoing floating volatility patterns of Elite Semiconductor and Founding Construction.

Diversification Opportunities for Elite Semiconductor and Founding Construction

0.46

Correlation Coefficient

Elite Semiconductor  Founding Construction

Very weak diversification

The 3 months correlation between Elite and Founding is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Elite Semiconductor Memory and Founding Construction Developm in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Founding Construction and Elite Semiconductor 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 Elite Semiconductor Memory are associated (or correlated) with Founding Construction. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Founding Construction has no effect on the direction of Elite Semiconductor i.e., Elite Semiconductor and Founding Construction go up and down completely randomly.

Pair Corralation between Elite Semiconductor and Founding Construction

Assuming the 90 days trading horizon Elite Semiconductor Memory is expected to under-perform the Founding Construction. In addition to that, Elite Semiconductor is 1.42 times more volatile than Founding Construction Development. It trades about -0.17 of its total potential returns per unit of risk. Founding Construction Development is currently generating about -0.04 per unit of volatility. If you would invest  2,180  in Founding Construction Development on September 2, 2024 and sell it today you would lose (90.00) from holding Founding Construction Development or give up 4.13% of portfolio value over 90 days.

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

Elite Semiconductor Memory  vs.  Founding Construction Developm

Elite Semiconductor

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Elite Semiconductor Memory 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.

Founding Construction

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Founding Construction Development has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Founding Construction 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 Elite Semiconductor and Founding Construction

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

The idea behind Elite Semiconductor Memory and Founding Construction Development 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.

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.