Correlation Between Audix Corp and Elan Microelectronics

Can any of the company-specific risk be diversified away by investing in both Audix Corp and Elan Microelectronics 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 Audix Corp and Elan Microelectronics into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Audix Corp and Elan Microelectronics Corp, you can compare the effects of market volatilities on Audix Corp and Elan Microelectronics 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 Audix Corp with a short position of Elan Microelectronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Audix Corp and Elan Microelectronics.

Diversification Opportunities for Audix Corp and Elan Microelectronics

0.25

Correlation Coefficient

Audix Corp  Elan Microelectronics

Modest diversification

The 3 months correlation between Audix and Elan is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Audix Corp and Elan Microelectronics Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Elan Microelectronics and Audix Corp 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 Audix Corp are associated (or correlated) with Elan Microelectronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Elan Microelectronics has no effect on the direction of Audix Corp i.e., Audix Corp and Elan Microelectronics go up and down completely randomly.

Pair Corralation between Audix Corp and Elan Microelectronics

Assuming the 90 days trading horizon Audix Corp is expected to generate 0.37 times more return on investment than Elan Microelectronics. However, Audix Corp is 2.73 times less risky than Elan Microelectronics. It trades about -0.01 of its potential returns per unit of risk. Elan Microelectronics Corp is currently generating about -0.01 per unit of risk. If you would invest  7,040  in Audix Corp on December 5, 2024 and sell it today you would lose (20.00) from holding Audix Corp or give up 0.28% of portfolio value over 90 days.

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

Audix Corp  vs.  Elan Microelectronics Corp

Audix Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Audix Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Audix Corp is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Elan Microelectronics

Risk-Adjusted Performance

Very Weak

Over the last 90 days Elan Microelectronics Corp has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

Pair Trading with Audix Corp and Elan Microelectronics

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

The idea behind Audix Corp and Elan Microelectronics Corp 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.