Correlation Between Elite Color and National Silicon

Can any of the company-specific risk be diversified away by investing in both Elite Color and National Silicon 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 National Silicon 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 National Silicon Industry, you can compare the effects of market volatilities on Elite Color and National Silicon 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 National Silicon. Check out your portfolio center. Please also check ongoing floating volatility patterns of Elite Color and National Silicon.

Diversification Opportunities for Elite Color and National Silicon

0.34

Correlation Coefficient

Elite Color  National Silicon

Weak diversification

The 3 months correlation between Elite and National is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Elite Color Environmental and National Silicon Industry in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on National Silicon Industry 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 National Silicon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of National Silicon Industry has no effect on the direction of Elite Color i.e., Elite Color and National Silicon go up and down completely randomly.

Pair Corralation between Elite Color and National Silicon

Assuming the 90 days trading horizon Elite Color Environmental is expected to generate 0.54 times more return on investment than National Silicon. However, Elite Color Environmental is 1.87 times less risky than National Silicon. It trades about 0.13 of its potential returns per unit of risk. National Silicon Industry is currently generating about -0.01 per unit of risk. If you would invest  601.00  in Elite Color Environmental on December 26, 2024 and sell it today you would earn a total of  70.00  from holding Elite Color Environmental or generate 11.65% return on investment over 90 days.

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

Elite Color Environmental  vs.  National Silicon Industry

Elite Color Environmental

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Elite Color Environmental are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Elite Color sustained solid returns over the last few months and may actually be approaching a breakup point.

National Silicon Industry

Risk-Adjusted Performance

Very Weak

Over the last 90 days National Silicon Industry has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, National Silicon 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 National Silicon

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

The idea behind Elite Color Environmental and National Silicon Industry 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.