Correlation Between Elite Semiconductor and ITE Tech

Can any of the company-specific risk be diversified away by investing in both Elite Semiconductor and ITE Tech 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 Elite Semiconductor and ITE Tech into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Elite Semiconductor Memory and ITE Tech, you can compare the effects of market volatilities on Elite Semiconductor and ITE Tech 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 Elite Semiconductor with a short position of ITE Tech. Check out your portfolio center. Please also check ongoing floating volatility patterns of Elite Semiconductor and ITE Tech.

Diversification Opportunities for Elite Semiconductor and ITE Tech

0.76

Correlation Coefficient

Elite Semiconductor  ITE Tech

Poor diversification

The 3 months correlation between Elite and ITE is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Elite Semiconductor Memory and ITE Tech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ITE Tech and Elite Semiconductor 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 Elite Semiconductor Memory are associated (or correlated) with ITE Tech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ITE Tech has no effect on the direction of Elite Semiconductor i.e., Elite Semiconductor and ITE Tech go up and down completely randomly.

Pair Corralation between Elite Semiconductor and ITE Tech

Assuming the 90 days trading horizon Elite Semiconductor Memory is expected to generate 1.55 times more return on investment than ITE Tech. However, Elite Semiconductor is 1.55 times more volatile than ITE Tech. It trades about 0.06 of its potential returns per unit of risk. ITE Tech is currently generating about 0.04 per unit of risk. If you would invest  6,200  in Elite Semiconductor Memory on December 20, 2024 and sell it today you would earn a total of  410.00  from holding Elite Semiconductor Memory or generate 6.61% return on investment over 90 days.

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

Elite Semiconductor Memory  vs.  ITE Tech

Elite Semiconductor

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Elite Semiconductor Memory are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Elite Semiconductor may actually be approaching a critical reversion point that can send shares even higher in April 2025.

ITE Tech

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in ITE Tech are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, ITE Tech 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 Elite Semiconductor and ITE Tech

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

The idea behind Elite Semiconductor Memory and ITE Tech 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .