Correlation Between Innolux Corp and Delta Electronics

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

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

Diversification Opportunities for Innolux Corp and Delta Electronics

0.62

Correlation Coefficient

Innolux Corp  Delta Electronics

Poor diversification

The 3 months correlation between Innolux and Delta is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Innolux Corp and Delta Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Delta Electronics and Innolux 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 Innolux Corp are associated (or correlated) with Delta Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Delta Electronics has no effect on the direction of Innolux Corp i.e., Innolux Corp and Delta Electronics go up and down completely randomly.

Pair Corralation between Innolux Corp and Delta Electronics

Assuming the 90 days trading horizon Innolux Corp is expected to generate 1.08 times more return on investment than Delta Electronics. However, Innolux Corp is 1.08 times more volatile than Delta Electronics. It trades about 0.0 of its potential returns per unit of risk. Delta Electronics is currently generating about -0.02 per unit of risk. If you would invest  1,530  in Innolux Corp on September 2, 2024 and sell it today you would lose (15.00) from holding Innolux Corp or give up 0.98% of portfolio value over 90 days.

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

Innolux Corp  vs.  Delta Electronics

Innolux Corp

Risk-Adjusted Performance

0 of 100

Very Weak

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

Delta Electronics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Delta Electronics has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Delta Electronics 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 Innolux Corp and Delta Electronics

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

The idea behind Innolux Corp and Delta Electronics 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.