Correlation Between Elite Material and Yageo Corp

Can any of the company-specific risk be diversified away by investing in both Elite Material and Yageo Corp 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 Yageo Corp 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 Yageo Corp, you can compare the effects of market volatilities on Elite Material and Yageo Corp 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 Yageo Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Elite Material and Yageo Corp.

Diversification Opportunities for Elite Material and Yageo Corp

0.35

Correlation Coefficient

Elite Material  Yageo Corp

Weak diversification

The 3 months correlation between Elite and Yageo is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Elite Material Co and Yageo Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Yageo Corp 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 Yageo Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Yageo Corp has no effect on the direction of Elite Material i.e., Elite Material and Yageo Corp go up and down completely randomly.

Pair Corralation between Elite Material and Yageo Corp

Assuming the 90 days trading horizon Elite Material Co is expected to under-perform the Yageo Corp. In addition to that, Elite Material is 1.44 times more volatile than Yageo Corp. It trades about -0.01 of its total potential returns per unit of risk. Yageo Corp is currently generating about 0.02 per unit of volatility. If you would invest  53,400  in Yageo Corp on December 21, 2024 and sell it today you would earn a total of  400.00  from holding Yageo Corp or generate 0.75% return on investment over 90 days.

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

Elite Material Co  vs.  Yageo Corp

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.

Yageo Corp

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Yageo Corp are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Yageo Corp is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Elite Material and Yageo Corp

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

The idea behind Elite Material Co and Yageo Corp 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.