Correlation Between Action Electronics and Bright Led
Can any of the company-specific risk be diversified away by investing in both Action Electronics and Bright Led 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 Action Electronics and Bright Led into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Action Electronics Co and Bright Led Electronics, you can compare the effects of market volatilities on Action Electronics and Bright Led 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 Action Electronics with a short position of Bright Led. Check out your portfolio center. Please also check ongoing floating volatility patterns of Action Electronics and Bright Led.
Diversification Opportunities for Action Electronics and Bright Led
-0.58 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Action and Bright is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding Action Electronics Co and Bright Led Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bright Led Electronics and Action Electronics 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 Action Electronics Co are associated (or correlated) with Bright Led. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bright Led Electronics has no effect on the direction of Action Electronics i.e., Action Electronics and Bright Led go up and down completely randomly.
Pair Corralation between Action Electronics and Bright Led
Assuming the 90 days trading horizon Action Electronics Co is expected to under-perform the Bright Led. But the stock apears to be less risky and, when comparing its historical volatility, Action Electronics Co is 1.09 times less risky than Bright Led. The stock trades about -0.1 of its potential returns per unit of risk. The Bright Led Electronics is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 2,110 in Bright Led Electronics on November 21, 2024 and sell it today you would earn a total of 300.00 from holding Bright Led Electronics or generate 14.22% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Very Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Action Electronics Co vs. Bright Led Electronics
Performance |
Timeline |
Action Electronics |
Bright Led Electronics |
Action Electronics and Bright Led Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Action Electronics and Bright Led
The main advantage of trading using opposite Action Electronics and Bright Led positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Action Electronics position performs unexpectedly, Bright Led 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 Bright Led will offset losses from the drop in Bright Led's long position.Action Electronics vs. Amtran Technology Co | ||
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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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
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