Correlation Between Everlight Electronics and Shiny Chemical

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

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

Diversification Opportunities for Everlight Electronics and Shiny Chemical

-0.14

Correlation Coefficient

Everlight Electronics  Shiny Chemical

Good diversification

The 3 months correlation between Everlight and Shiny is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Everlight Electronics Co and Shiny Chemical Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shiny Chemical Industrial and Everlight Electronics 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 Everlight Electronics Co are associated (or correlated) with Shiny Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shiny Chemical Industrial has no effect on the direction of Everlight Electronics i.e., Everlight Electronics and Shiny Chemical go up and down completely randomly.

Pair Corralation between Everlight Electronics and Shiny Chemical

Assuming the 90 days trading horizon Everlight Electronics Co is expected to generate 1.44 times more return on investment than Shiny Chemical. However, Everlight Electronics is 1.44 times more volatile than Shiny Chemical Industrial. It trades about -0.01 of its potential returns per unit of risk. Shiny Chemical Industrial is currently generating about -0.12 per unit of risk. If you would invest  8,450  in Everlight Electronics Co on October 9, 2024 and sell it today you would lose (120.00) from holding Everlight Electronics Co or give up 1.42% of portfolio value over 90 days.

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

Everlight Electronics Co  vs.  Shiny Chemical Industrial

Everlight Electronics

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Everlight Electronics Co are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Everlight Electronics may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Shiny Chemical Industrial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Shiny Chemical Industrial has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Pair Trading with Everlight Electronics and Shiny Chemical

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

The idea behind Everlight Electronics Co and Shiny Chemical Industrial 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.