Correlation Between Greatek Electronics and Delta Electronics

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

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

Diversification Opportunities for Greatek Electronics and Delta Electronics

0.16

Correlation Coefficient

Greatek Electronics  Delta Electronics

Average diversification

The 3 months correlation between Greatek and Delta is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Greatek Electronics and Delta Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Delta Electronics and Greatek 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 Greatek Electronics are associated (or correlated) with Delta Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Delta Electronics has no effect on the direction of Greatek Electronics i.e., Greatek Electronics and Delta Electronics go up and down completely randomly.

Pair Corralation between Greatek Electronics and Delta Electronics

Assuming the 90 days trading horizon Greatek Electronics is expected to generate 7.28 times less return on investment than Delta Electronics. But when comparing it to its historical volatility, Greatek Electronics is 1.71 times less risky than Delta Electronics. It trades about 0.02 of its potential returns per unit of risk. Delta Electronics is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  38,900  in Delta Electronics on September 12, 2024 and sell it today you would earn a total of  2,550  from holding Delta Electronics or generate 6.56% return on investment over 90 days.

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

Greatek Electronics  vs.  Delta Electronics

Greatek Electronics

Risk-Adjusted Performance

1 of 100

Weak

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

Delta Electronics

Risk-Adjusted Performance

5 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Delta Electronics are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Delta Electronics may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Greatek Electronics and Delta Electronics

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

The idea behind Greatek Electronics and Delta Electronics 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 Transaction History module to view history of all your transactions and understand their impact on performance.