Correlation Between Elan Microelectronics and WinMate Communication

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

Diversification Opportunities for Elan Microelectronics and WinMate Communication

0.39

Correlation Coefficient

Elan Microelectronics  WinMate Communication

Weak diversification

The 3 months correlation between Elan and WinMate is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Elan Microelectronics Corp and WinMate Communication INC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WinMate Communication INC 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 WinMate Communication. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WinMate Communication INC has no effect on the direction of Elan Microelectronics i.e., Elan Microelectronics and WinMate Communication go up and down completely randomly.

Pair Corralation between Elan Microelectronics and WinMate Communication

Assuming the 90 days trading horizon Elan Microelectronics Corp is expected to generate 1.09 times more return on investment than WinMate Communication. However, Elan Microelectronics is 1.09 times more volatile than WinMate Communication INC. It trades about 0.07 of its potential returns per unit of risk. WinMate Communication INC is currently generating about 0.08 per unit of risk. If you would invest  8,133  in Elan Microelectronics Corp on September 16, 2024 and sell it today you would earn a total of  7,317  from holding Elan Microelectronics Corp or generate 89.97% return on investment over 90 days.

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

Elan Microelectronics Corp  vs.  WinMate Communication INC

Elan Microelectronics

Risk-Adjusted Performance

2 of 100

Weak

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.

WinMate Communication INC

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in WinMate Communication INC are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, WinMate Communication may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Elan Microelectronics and WinMate Communication

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

The idea behind Elan Microelectronics Corp and WinMate Communication INC 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.