Correlation Between Elite Semiconductor and PlayNitride

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

Diversification Opportunities for Elite Semiconductor and PlayNitride

-0.53

Correlation Coefficient

Elite Semiconductor  PlayNitride

Excellent diversification

The 3 months correlation between Elite and PlayNitride is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Elite Semiconductor Memory and PlayNitride in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PlayNitride 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 PlayNitride. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PlayNitride has no effect on the direction of Elite Semiconductor i.e., Elite Semiconductor and PlayNitride go up and down completely randomly.

Pair Corralation between Elite Semiconductor and PlayNitride

Assuming the 90 days trading horizon Elite Semiconductor Memory is expected to under-perform the PlayNitride. But the stock apears to be less risky and, when comparing its historical volatility, Elite Semiconductor Memory is 2.91 times less risky than PlayNitride. The stock trades about -0.09 of its potential returns per unit of risk. The PlayNitride is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest  10,750  in PlayNitride on October 9, 2024 and sell it today you would earn a total of  10,450  from holding PlayNitride or generate 97.21% return on investment over 90 days.

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

Elite Semiconductor Memory  vs.  PlayNitride

Elite Semiconductor

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Elite Semiconductor Memory has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

PlayNitride

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in PlayNitride are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, PlayNitride showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Elite Semiconductor and PlayNitride

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

The idea behind Elite Semiconductor Memory and PlayNitride 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.

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 Bonds Directory module to find actively traded corporate debentures issued by US companies.