Correlation Between StShine Optical and Eclat Textile

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

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

Diversification Opportunities for StShine Optical and Eclat Textile

0.62

Correlation Coefficient

StShine Optical  Eclat Textile

Poor diversification

The 3 months correlation between StShine and Eclat is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding StShine Optical Co and Eclat Textile Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eclat Textile and StShine Optical 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 StShine Optical Co are associated (or correlated) with Eclat Textile. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eclat Textile has no effect on the direction of StShine Optical i.e., StShine Optical and Eclat Textile go up and down completely randomly.

Pair Corralation between StShine Optical and Eclat Textile

Assuming the 90 days trading horizon StShine Optical Co is expected to under-perform the Eclat Textile. In addition to that, StShine Optical is 1.2 times more volatile than Eclat Textile Co. It trades about -0.08 of its total potential returns per unit of risk. Eclat Textile Co is currently generating about -0.04 per unit of volatility. If you would invest  55,500  in Eclat Textile Co on October 20, 2024 and sell it today you would lose (2,500) from holding Eclat Textile Co or give up 4.5% of portfolio value over 90 days.

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

StShine Optical Co  vs.  Eclat Textile Co

StShine Optical

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days StShine Optical Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Eclat Textile

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Eclat Textile Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Eclat Textile is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with StShine Optical and Eclat Textile

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

The idea behind StShine Optical Co and Eclat Textile 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.