Correlation Between Elan Microelectronics and MPI

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

Diversification Opportunities for Elan Microelectronics and MPI

0.57

Correlation Coefficient

Elan Microelectronics  MPI

Very weak diversification

The 3 months correlation between Elan and MPI is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Elan Microelectronics Corp and MPI Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MPI Corporation 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 MPI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MPI Corporation has no effect on the direction of Elan Microelectronics i.e., Elan Microelectronics and MPI go up and down completely randomly.

Pair Corralation between Elan Microelectronics and MPI

Assuming the 90 days trading horizon Elan Microelectronics Corp is expected to under-perform the MPI. But the stock apears to be less risky and, when comparing its historical volatility, Elan Microelectronics Corp is 1.8 times less risky than MPI. The stock trades about -0.01 of its potential returns per unit of risk. The MPI Corporation is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  74,700  in MPI Corporation on September 22, 2024 and sell it today you would earn a total of  12,500  from holding MPI Corporation or generate 16.73% return on investment over 90 days.

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

Elan Microelectronics Corp  vs.  MPI Corp.

Elan Microelectronics

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Elan Microelectronics Corp are ranked lower than 1 (%) 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.

MPI Corporation

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in MPI Corporation are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, MPI showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Elan Microelectronics and MPI

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

The idea behind Elan Microelectronics Corp and MPI Corporation 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..