Correlation Between ELMOS SEMICONDUCTOR and Meituan

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

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

Diversification Opportunities for ELMOS SEMICONDUCTOR and Meituan

-0.28

Correlation Coefficient

ELMOS SEMICONDUCTOR  Meituan

Very good diversification

The 3 months correlation between ELMOS and Meituan is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding ELMOS SEMICONDUCTOR and Meituan in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Meituan and ELMOS 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 ELMOS SEMICONDUCTOR are associated (or correlated) with Meituan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Meituan has no effect on the direction of ELMOS SEMICONDUCTOR i.e., ELMOS SEMICONDUCTOR and Meituan go up and down completely randomly.

Pair Corralation between ELMOS SEMICONDUCTOR and Meituan

Assuming the 90 days trading horizon ELMOS SEMICONDUCTOR is expected to generate 8.17 times less return on investment than Meituan. But when comparing it to its historical volatility, ELMOS SEMICONDUCTOR is 1.62 times less risky than Meituan. It trades about 0.02 of its potential returns per unit of risk. Meituan is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  1,446  in Meituan on September 15, 2024 and sell it today you would earn a total of  535.00  from holding Meituan or generate 37.0% return on investment over 90 days.

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

ELMOS SEMICONDUCTOR  vs.  Meituan

ELMOS SEMICONDUCTOR

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in ELMOS SEMICONDUCTOR are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, ELMOS SEMICONDUCTOR is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Meituan

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Meituan are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Meituan reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ELMOS SEMICONDUCTOR and Meituan

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

The idea behind ELMOS SEMICONDUCTOR and Meituan 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.