Correlation Between Elite Material and Compeq Manufacturing

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

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

Diversification Opportunities for Elite Material and Compeq Manufacturing

0.41

Correlation Coefficient

Elite Material  Compeq Manufacturing

Very weak diversification

The 3 months correlation between Elite and Compeq is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Elite Material Co and Compeq Manufacturing Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Compeq Manufacturing and Elite Material 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 Elite Material Co are associated (or correlated) with Compeq Manufacturing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Compeq Manufacturing has no effect on the direction of Elite Material i.e., Elite Material and Compeq Manufacturing go up and down completely randomly.

Pair Corralation between Elite Material and Compeq Manufacturing

Assuming the 90 days trading horizon Elite Material Co is expected to generate 1.65 times more return on investment than Compeq Manufacturing. However, Elite Material is 1.65 times more volatile than Compeq Manufacturing Co. It trades about -0.02 of its potential returns per unit of risk. Compeq Manufacturing Co is currently generating about -0.13 per unit of risk. If you would invest  61,900  in Elite Material Co on December 29, 2024 and sell it today you would lose (3,400) from holding Elite Material Co or give up 5.49% of portfolio value over 90 days.

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

Elite Material Co  vs.  Compeq Manufacturing Co

Elite Material

Risk-Adjusted Performance

Very Weak

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

Compeq Manufacturing

Risk-Adjusted Performance

Very Weak

Over the last 90 days Compeq Manufacturing Co 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 April 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Elite Material and Compeq Manufacturing

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

The idea behind Elite Material Co and Compeq Manufacturing 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.