Correlation Between Delta Electronics and Eureka Design

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

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

Diversification Opportunities for Delta Electronics and Eureka Design

-0.04

Correlation Coefficient

Delta Electronics  Eureka Design

Good diversification

The 3 months correlation between Delta and Eureka is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding Delta Electronics Public and Eureka Design Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eureka Design Public and Delta Electronics 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 Delta Electronics Public are associated (or correlated) with Eureka Design. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eureka Design Public has no effect on the direction of Delta Electronics i.e., Delta Electronics and Eureka Design go up and down completely randomly.

Pair Corralation between Delta Electronics and Eureka Design

Assuming the 90 days trading horizon Delta Electronics Public is expected to generate 1.08 times more return on investment than Eureka Design. However, Delta Electronics is 1.08 times more volatile than Eureka Design Public. It trades about 0.22 of its potential returns per unit of risk. Eureka Design Public is currently generating about 0.21 per unit of risk. If you would invest  10,400  in Delta Electronics Public on September 12, 2024 and sell it today you would earn a total of  4,850  from holding Delta Electronics Public or generate 46.63% return on investment over 90 days.

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

Delta Electronics Public  vs.  Eureka Design Public

Delta Electronics Public

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Delta Electronics Public are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite somewhat conflicting fundamental drivers, Delta Electronics sustained solid returns over the last few months and may actually be approaching a breakup point.

Eureka Design Public

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Eureka Design Public are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite somewhat conflicting fundamental drivers, Eureka Design sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Delta Electronics and Eureka Design

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

The idea behind Delta Electronics Public and Eureka Design Public 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.