Correlation Between Microelectronics and Excellence Optoelectronic

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

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

Diversification Opportunities for Microelectronics and Excellence Optoelectronic

0.64

Correlation Coefficient

Microelectronics  Excellence Optoelectronic

Poor diversification

The 3 months correlation between Microelectronics and Excellence is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Microelectronics Technology and Excellence Optoelectronic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Excellence Optoelectronic and Microelectronics 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 Microelectronics Technology are associated (or correlated) with Excellence Optoelectronic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Excellence Optoelectronic has no effect on the direction of Microelectronics i.e., Microelectronics and Excellence Optoelectronic go up and down completely randomly.

Pair Corralation between Microelectronics and Excellence Optoelectronic

Assuming the 90 days trading horizon Microelectronics is expected to generate 13.9 times less return on investment than Excellence Optoelectronic. But when comparing it to its historical volatility, Microelectronics Technology is 1.42 times less risky than Excellence Optoelectronic. It trades about 0.0 of its potential returns per unit of risk. Excellence Optoelectronic is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  2,575  in Excellence Optoelectronic on September 15, 2024 and sell it today you would earn a total of  190.00  from holding Excellence Optoelectronic or generate 7.38% return on investment over 90 days.

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

Microelectronics Technology  vs.  Excellence Optoelectronic

Microelectronics Tec

Risk-Adjusted Performance

0 of 100

Very Weak

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

Excellence Optoelectronic

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Excellence Optoelectronic are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Excellence Optoelectronic may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Microelectronics and Excellence Optoelectronic

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

The idea behind Microelectronics Technology and Excellence Optoelectronic 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.