Correlation Between Elan Microelectronics and Grand Plastic

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

Diversification Opportunities for Elan Microelectronics and Grand Plastic

-0.15

Correlation Coefficient

Elan Microelectronics  Grand Plastic

Good diversification

The 3 months correlation between Elan and Grand is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Elan Microelectronics Corp and Grand Plastic Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Grand Plastic 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 Grand Plastic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Grand Plastic Technology has no effect on the direction of Elan Microelectronics i.e., Elan Microelectronics and Grand Plastic go up and down completely randomly.

Pair Corralation between Elan Microelectronics and Grand Plastic

Assuming the 90 days trading horizon Elan Microelectronics is expected to generate 3.31 times less return on investment than Grand Plastic. But when comparing it to its historical volatility, Elan Microelectronics Corp is 1.83 times less risky than Grand Plastic. It trades about 0.07 of its potential returns per unit of risk. Grand Plastic Technology is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  21,637  in Grand Plastic Technology on September 13, 2024 and sell it today you would earn a total of  153,863  from holding Grand Plastic Technology or generate 711.11% return on investment over 90 days.

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

Elan Microelectronics Corp  vs.  Grand Plastic Technology

Elan Microelectronics

Risk-Adjusted Performance

2 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Elan Microelectronics Corp are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. 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.

Grand Plastic Technology

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Grand Plastic Technology 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 Elan Microelectronics and Grand Plastic

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

The idea behind Elan Microelectronics Corp and Grand Plastic 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.