Correlation Between Delta Electronics and Song Shang

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

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

Diversification Opportunities for Delta Electronics and Song Shang

-0.77

Correlation Coefficient

Delta Electronics  Song Shang

Pay attention - limited upside

The 3 months correlation between Delta and Song is -0.77. Overlapping area represents the amount of risk that can be diversified away by holding Delta Electronics and Song Shang Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Song Shang Electronics and Delta 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 Delta Electronics are associated (or correlated) with Song Shang. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Song Shang Electronics has no effect on the direction of Delta Electronics i.e., Delta Electronics and Song Shang go up and down completely randomly.

Pair Corralation between Delta Electronics and Song Shang

Assuming the 90 days trading horizon Delta Electronics is expected to under-perform the Song Shang. In addition to that, Delta Electronics is 1.38 times more volatile than Song Shang Electronics. It trades about -0.03 of its total potential returns per unit of risk. Song Shang Electronics is currently generating about 0.16 per unit of volatility. If you would invest  2,630  in Song Shang Electronics on December 22, 2024 and sell it today you would earn a total of  425.00  from holding Song Shang Electronics or generate 16.16% return on investment over 90 days.

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

Delta Electronics  vs.  Song Shang Electronics

Delta Electronics

Risk-Adjusted Performance

Very Weak

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

Song Shang Electronics

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Song Shang Electronics are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Song Shang showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Delta Electronics and Song Shang

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

The idea behind Delta Electronics and Song Shang Electronics 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.