Correlation Between Elan Microelectronics and Plastron Precision
Can any of the company-specific risk be diversified away by investing in both Elan Microelectronics and Plastron Precision 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 Plastron Precision 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 Plastron Precision Co, you can compare the effects of market volatilities on Elan Microelectronics and Plastron Precision 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 Plastron Precision. Check out your portfolio center. Please also check ongoing floating volatility patterns of Elan Microelectronics and Plastron Precision.
Diversification Opportunities for Elan Microelectronics and Plastron Precision
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Elan and Plastron is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Elan Microelectronics Corp and Plastron Precision Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Plastron Precision 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 Plastron Precision. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Plastron Precision has no effect on the direction of Elan Microelectronics i.e., Elan Microelectronics and Plastron Precision go up and down completely randomly.
Pair Corralation between Elan Microelectronics and Plastron Precision
Assuming the 90 days trading horizon Elan Microelectronics is expected to generate 2.52 times less return on investment than Plastron Precision. In addition to that, Elan Microelectronics is 1.91 times more volatile than Plastron Precision Co. It trades about 0.05 of its total potential returns per unit of risk. Plastron Precision Co is currently generating about 0.22 per unit of volatility. If you would invest 1,485 in Plastron Precision Co on December 3, 2024 and sell it today you would earn a total of 170.00 from holding Plastron Precision Co or generate 11.45% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 98.25% |
Values | Daily Returns |
Elan Microelectronics Corp vs. Plastron Precision Co
Performance |
Timeline |
Elan Microelectronics |
Plastron Precision |
Elan Microelectronics and Plastron Precision Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Elan Microelectronics and Plastron Precision
The main advantage of trading using opposite Elan Microelectronics and Plastron Precision positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Elan Microelectronics position performs unexpectedly, Plastron Precision 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 Plastron Precision will offset losses from the drop in Plastron Precision's long position.The idea behind Elan Microelectronics Corp and Plastron Precision Co 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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Check out your portfolio center.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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.
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