Correlation Between Elan Microelectronics and Gigastorage Corp

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

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

Diversification Opportunities for Elan Microelectronics and Gigastorage Corp

0.01

Correlation Coefficient

Elan Microelectronics  Gigastorage Corp

Significant diversification

The 3 months correlation between Elan and Gigastorage is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Elan Microelectronics Corp and Gigastorage Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gigastorage Corp and Elan Microelectronics 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 Elan Microelectronics Corp are associated (or correlated) with Gigastorage Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gigastorage Corp has no effect on the direction of Elan Microelectronics i.e., Elan Microelectronics and Gigastorage Corp go up and down completely randomly.

Pair Corralation between Elan Microelectronics and Gigastorage Corp

Assuming the 90 days trading horizon Elan Microelectronics Corp is expected to generate 0.74 times more return on investment than Gigastorage Corp. However, Elan Microelectronics Corp is 1.35 times less risky than Gigastorage Corp. It trades about -0.04 of its potential returns per unit of risk. Gigastorage Corp is currently generating about -0.15 per unit of risk. If you would invest  14,750  in Elan Microelectronics Corp on October 23, 2024 and sell it today you would lose (250.00) from holding Elan Microelectronics Corp or give up 1.69% of portfolio value over 90 days.

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

Elan Microelectronics Corp  vs.  Gigastorage Corp

Elan Microelectronics

Risk-Adjusted Performance

0 of 100

Very Weak

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

Gigastorage Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Gigastorage Corp 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 Elan Microelectronics and Gigastorage Corp

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

The idea behind Elan Microelectronics Corp and Gigastorage 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.