Correlation Between ABCO Electronics and Mobase Electronics

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

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

Diversification Opportunities for ABCO Electronics and Mobase Electronics

0.31

Correlation Coefficient

ABCO Electronics  Mobase Electronics

Weak diversification

The 3 months correlation between ABCO and Mobase is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding ABCO Electronics Co and Mobase Electronics CoLtd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mobase Electronics CoLtd and ABCO 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 ABCO Electronics Co are associated (or correlated) with Mobase Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mobase Electronics CoLtd has no effect on the direction of ABCO Electronics i.e., ABCO Electronics and Mobase Electronics go up and down completely randomly.

Pair Corralation between ABCO Electronics and Mobase Electronics

Assuming the 90 days trading horizon ABCO Electronics Co is expected to generate 1.99 times more return on investment than Mobase Electronics. However, ABCO Electronics is 1.99 times more volatile than Mobase Electronics CoLtd. It trades about 0.13 of its potential returns per unit of risk. Mobase Electronics CoLtd is currently generating about 0.08 per unit of risk. If you would invest  461,000  in ABCO Electronics Co on December 23, 2024 and sell it today you would earn a total of  114,000  from holding ABCO Electronics Co or generate 24.73% return on investment over 90 days.

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

ABCO Electronics Co  vs.  Mobase Electronics CoLtd

ABCO Electronics

Risk-Adjusted Performance

OK

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

Mobase Electronics CoLtd

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Mobase Electronics CoLtd are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Mobase Electronics may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with ABCO Electronics and Mobase Electronics

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

The idea behind ABCO Electronics Co and Mobase Electronics CoLtd 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 Transaction History module to view history of all your transactions and understand their impact on performance.