Correlation Between Success Electronics and GEM

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

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

Diversification Opportunities for Success Electronics and GEM

0.3

Correlation Coefficient

Success Electronics  GEM

Weak diversification

The 3 months correlation between Success and GEM is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Success Electronics and GEM Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GEM Co and Success 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 Success Electronics are associated (or correlated) with GEM. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GEM Co has no effect on the direction of Success Electronics i.e., Success Electronics and GEM go up and down completely randomly.

Pair Corralation between Success Electronics and GEM

Assuming the 90 days trading horizon Success Electronics is expected to generate 1.41 times more return on investment than GEM. However, Success Electronics is 1.41 times more volatile than GEM Co. It trades about 0.1 of its potential returns per unit of risk. GEM Co is currently generating about -0.07 per unit of risk. If you would invest  321.00  in Success Electronics on October 9, 2024 and sell it today you would earn a total of  56.00  from holding Success Electronics or generate 17.45% return on investment over 90 days.

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

Success Electronics  vs.  GEM Co

Success Electronics

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Success Electronics are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Success Electronics sustained solid returns over the last few months and may actually be approaching a breakup point.

GEM Co

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days GEM Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Success Electronics and GEM

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

The idea behind Success Electronics and GEM Co 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.