Correlation Between Elite Color and Allwin Telecommunicatio

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

By analyzing existing cross correlation between Elite Color Environmental and Allwin Telecommunication Co, you can compare the effects of market volatilities on Elite Color and Allwin Telecommunicatio 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 Elite Color with a short position of Allwin Telecommunicatio. Check out your portfolio center. Please also check ongoing floating volatility patterns of Elite Color and Allwin Telecommunicatio.

Diversification Opportunities for Elite Color and Allwin Telecommunicatio

0.7

Correlation Coefficient

Elite Color  Allwin Telecommunicatio

Poor diversification

The 3 months correlation between Elite and Allwin is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Elite Color Environmental and Allwin Telecommunication Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Allwin Telecommunicatio and Elite Color 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 Elite Color Environmental are associated (or correlated) with Allwin Telecommunicatio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Allwin Telecommunicatio has no effect on the direction of Elite Color i.e., Elite Color and Allwin Telecommunicatio go up and down completely randomly.

Pair Corralation between Elite Color and Allwin Telecommunicatio

Assuming the 90 days trading horizon Elite Color Environmental is expected to under-perform the Allwin Telecommunicatio. But the stock apears to be less risky and, when comparing its historical volatility, Elite Color Environmental is 2.0 times less risky than Allwin Telecommunicatio. The stock trades about -0.01 of its potential returns per unit of risk. The Allwin Telecommunication Co is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  607.00  in Allwin Telecommunication Co on November 29, 2024 and sell it today you would earn a total of  2.00  from holding Allwin Telecommunication Co or generate 0.33% return on investment over 90 days.

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

Elite Color Environmental  vs.  Allwin Telecommunication Co

Elite Color Environmental

Risk-Adjusted Performance

Very Weak

Over the last 90 days Elite Color Environmental has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Elite Color is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Allwin Telecommunicatio

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Allwin Telecommunication Co are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Allwin Telecommunicatio is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Elite Color and Allwin Telecommunicatio

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

The idea behind Elite Color Environmental and Allwin Telecommunication 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.

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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.