Correlation Between Everlight Electronics and RDC Semiconductor

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

Diversification Opportunities for Everlight Electronics and RDC Semiconductor

-0.05

Correlation Coefficient

Everlight Electronics  RDC Semiconductor

Good diversification

The 3 months correlation between Everlight and RDC is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Everlight Electronics Co and RDC Semiconductor Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RDC Semiconductor 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 RDC Semiconductor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RDC Semiconductor has no effect on the direction of Everlight Electronics i.e., Everlight Electronics and RDC Semiconductor go up and down completely randomly.

Pair Corralation between Everlight Electronics and RDC Semiconductor

Assuming the 90 days trading horizon Everlight Electronics Co is expected to generate 0.42 times more return on investment than RDC Semiconductor. However, Everlight Electronics Co is 2.38 times less risky than RDC Semiconductor. It trades about 0.12 of its potential returns per unit of risk. RDC Semiconductor Co is currently generating about 0.03 per unit of risk. If you would invest  3,543  in Everlight Electronics Co on October 11, 2024 and sell it today you would earn a total of  5,127  from holding Everlight Electronics Co or generate 144.71% return on investment over 90 days.

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

Everlight Electronics Co  vs.  RDC Semiconductor Co

Everlight Electronics

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Everlight Electronics Co are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Everlight Electronics showed solid returns over the last few months and may actually be approaching a breakup point.

RDC Semiconductor

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days RDC Semiconductor 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 February 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Everlight Electronics and RDC Semiconductor

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

The idea behind Everlight Electronics Co and RDC Semiconductor 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.