Correlation Between Yageo Corp and Greatek Electronics

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

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

Diversification Opportunities for Yageo Corp and Greatek Electronics

0.79

Correlation Coefficient

Yageo Corp  Greatek Electronics

Poor diversification

The 3 months correlation between Yageo and Greatek is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Yageo Corp and Greatek Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Greatek Electronics and Yageo Corp 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 Yageo Corp are associated (or correlated) with Greatek Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Greatek Electronics has no effect on the direction of Yageo Corp i.e., Yageo Corp and Greatek Electronics go up and down completely randomly.

Pair Corralation between Yageo Corp and Greatek Electronics

Assuming the 90 days trading horizon Yageo Corp is expected to generate 1.3 times less return on investment than Greatek Electronics. In addition to that, Yageo Corp is 1.75 times more volatile than Greatek Electronics. It trades about 0.08 of its total potential returns per unit of risk. Greatek Electronics is currently generating about 0.19 per unit of volatility. If you would invest  5,780  in Greatek Electronics on December 3, 2024 and sell it today you would earn a total of  650.00  from holding Greatek Electronics or generate 11.25% return on investment over 90 days.

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

Yageo Corp  vs.  Greatek Electronics

Yageo Corp

Risk-Adjusted Performance

Modest

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

Greatek Electronics

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Greatek Electronics are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Greatek Electronics may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Yageo Corp and Greatek Electronics

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

The idea behind Yageo Corp and Greatek 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.

Check out your portfolio center.

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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.