Correlation Between Billion Electric and Action Electronics

Can any of the company-specific risk be diversified away by investing in both Billion Electric and Action Electronics 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 Billion Electric and Action Electronics into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Billion Electric Co and Action Electronics Co, you can compare the effects of market volatilities on Billion Electric and Action Electronics 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 Billion Electric with a short position of Action Electronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Billion Electric and Action Electronics.

Diversification Opportunities for Billion Electric and Action Electronics

-0.2

Correlation Coefficient

Billion Electric  Action Electronics

Good diversification

The 3 months correlation between Billion and Action is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Billion Electric Co and Action Electronics Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Action Electronics and Billion Electric 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 Billion Electric Co are associated (or correlated) with Action Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Action Electronics has no effect on the direction of Billion Electric i.e., Billion Electric and Action Electronics go up and down completely randomly.

Pair Corralation between Billion Electric and Action Electronics

Assuming the 90 days trading horizon Billion Electric Co is expected to under-perform the Action Electronics. But the stock apears to be less risky and, when comparing its historical volatility, Billion Electric Co is 1.41 times less risky than Action Electronics. The stock trades about -0.39 of its potential returns per unit of risk. The Action Electronics Co is currently generating about -0.22 of returns per unit of risk over similar time horizon. If you would invest  2,155  in Action Electronics Co on October 7, 2024 and sell it today you would lose (245.00) from holding Action Electronics Co or give up 11.37% of portfolio value over 90 days.

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

Billion Electric Co  vs.  Action Electronics Co

Billion Electric

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Billion Electric Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in February 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Action Electronics

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Action Electronics Co are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Action Electronics 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 Billion Electric and Action Electronics

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

The idea behind Billion Electric Co and Action Electronics Co 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.