Correlation Between Bright Led and Everlight Electronics

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

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

Diversification Opportunities for Bright Led and Everlight Electronics

0.7

Correlation Coefficient

Bright Led  Everlight Electronics

Poor diversification

The 3 months correlation between Bright and Everlight is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Bright Led Electronics and Everlight Electronics Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Everlight Electronics and Bright Led 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 Bright Led Electronics are associated (or correlated) with Everlight Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Everlight Electronics has no effect on the direction of Bright Led i.e., Bright Led and Everlight Electronics go up and down completely randomly.

Pair Corralation between Bright Led and Everlight Electronics

Assuming the 90 days trading horizon Bright Led is expected to generate 2.11 times less return on investment than Everlight Electronics. In addition to that, Bright Led is 1.24 times more volatile than Everlight Electronics Co. It trades about 0.04 of its total potential returns per unit of risk. Everlight Electronics Co is currently generating about 0.1 per unit of volatility. If you would invest  3,714  in Everlight Electronics Co on December 4, 2024 and sell it today you would earn a total of  4,486  from holding Everlight Electronics Co or generate 120.79% return on investment over 90 days.

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

Bright Led Electronics  vs.  Everlight Electronics Co

Bright Led Electronics

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Bright Led Electronics are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Bright Led is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Everlight Electronics

Risk-Adjusted Performance

Insignificant

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

Pair Trading with Bright Led and Everlight Electronics

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

The idea behind Bright Led Electronics and Everlight 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.