Correlation Between Elitegroup Computer and InnoDisk

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

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

Diversification Opportunities for Elitegroup Computer and InnoDisk

0.81

Correlation Coefficient

Elitegroup Computer  InnoDisk

Very poor diversification

The 3 months correlation between Elitegroup and InnoDisk is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Elitegroup Computer Systems and InnoDisk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on InnoDisk and Elitegroup Computer 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 Elitegroup Computer Systems are associated (or correlated) with InnoDisk. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of InnoDisk has no effect on the direction of Elitegroup Computer i.e., Elitegroup Computer and InnoDisk go up and down completely randomly.

Pair Corralation between Elitegroup Computer and InnoDisk

Assuming the 90 days trading horizon Elitegroup Computer Systems is expected to under-perform the InnoDisk. But the stock apears to be less risky and, when comparing its historical volatility, Elitegroup Computer Systems is 1.13 times less risky than InnoDisk. The stock trades about -0.48 of its potential returns per unit of risk. The InnoDisk is currently generating about -0.32 of returns per unit of risk over similar time horizon. If you would invest  23,450  in InnoDisk on September 24, 2024 and sell it today you would lose (2,400) from holding InnoDisk or give up 10.23% of portfolio value over 90 days.

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

Elitegroup Computer Systems  vs.  InnoDisk

Elitegroup Computer

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Elitegroup Computer Systems has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

InnoDisk

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days InnoDisk has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Elitegroup Computer and InnoDisk

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

The idea behind Elitegroup Computer Systems and InnoDisk 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.