Correlation Between Double Medical and Everdisplay Optronics

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

By analyzing existing cross correlation between Double Medical Technology and Everdisplay Optronics Shanghai, you can compare the effects of market volatilities on Double Medical and Everdisplay Optronics 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 Double Medical with a short position of Everdisplay Optronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Double Medical and Everdisplay Optronics.

Diversification Opportunities for Double Medical and Everdisplay Optronics

0.78

Correlation Coefficient

Double Medical  Everdisplay Optronics

Poor diversification

The 3 months correlation between Double and Everdisplay is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Double Medical Technology and Everdisplay Optronics Shanghai in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Everdisplay Optronics and Double Medical 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 Double Medical Technology are associated (or correlated) with Everdisplay Optronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Everdisplay Optronics has no effect on the direction of Double Medical i.e., Double Medical and Everdisplay Optronics go up and down completely randomly.

Pair Corralation between Double Medical and Everdisplay Optronics

Assuming the 90 days trading horizon Double Medical Technology is expected to under-perform the Everdisplay Optronics. But the stock apears to be less risky and, when comparing its historical volatility, Double Medical Technology is 1.6 times less risky than Everdisplay Optronics. The stock trades about -0.16 of its potential returns per unit of risk. The Everdisplay Optronics Shanghai is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  244.00  in Everdisplay Optronics Shanghai on September 25, 2024 and sell it today you would lose (1.00) from holding Everdisplay Optronics Shanghai or give up 0.41% of portfolio value over 90 days.

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

Double Medical Technology  vs.  Everdisplay Optronics Shanghai

Double Medical Technology

Risk-Adjusted Performance

9 of 100

OK

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

Everdisplay Optronics

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Everdisplay Optronics Shanghai are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Everdisplay Optronics sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Double Medical and Everdisplay Optronics

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

The idea behind Double Medical Technology and Everdisplay Optronics Shanghai 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..