Correlation Between Elan Microelectronics and Stark Technology

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

Diversification Opportunities for Elan Microelectronics and Stark Technology

0.65

Correlation Coefficient

Elan Microelectronics  Stark Technology

Poor diversification

The 3 months correlation between Elan and Stark is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Elan Microelectronics Corp and Stark Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stark Technology 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 Stark Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stark Technology has no effect on the direction of Elan Microelectronics i.e., Elan Microelectronics and Stark Technology go up and down completely randomly.

Pair Corralation between Elan Microelectronics and Stark Technology

Assuming the 90 days trading horizon Elan Microelectronics is expected to generate 1.52 times less return on investment than Stark Technology. In addition to that, Elan Microelectronics is 1.22 times more volatile than Stark Technology. It trades about 0.05 of its total potential returns per unit of risk. Stark Technology is currently generating about 0.1 per unit of volatility. If you would invest  12,200  in Stark Technology on September 17, 2024 and sell it today you would earn a total of  1,150  from holding Stark Technology or generate 9.43% return on investment over 90 days.

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

Elan Microelectronics Corp  vs.  Stark Technology

Elan Microelectronics

Risk-Adjusted Performance

4 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Elan Microelectronics Corp are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Elan Microelectronics may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Stark Technology

Risk-Adjusted Performance

7 of 100

OK

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

Pair Trading with Elan Microelectronics and Stark Technology

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

The idea behind Elan Microelectronics Corp and Stark Technology 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.