Correlation Between Faraday Technology and Etron Technology

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

By analyzing existing cross correlation between Faraday Technology Corp and Etron Technology, you can compare the effects of market volatilities on Faraday Technology and Etron Technology 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 Faraday Technology with a short position of Etron Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Faraday Technology and Etron Technology.

Diversification Opportunities for Faraday Technology and Etron Technology

0.82

Correlation Coefficient

Faraday Technology  Etron Technology

Very poor diversification

The 3 months correlation between Faraday and Etron is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Faraday Technology Corp and Etron Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Etron Technology and Faraday Technology 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 Faraday Technology Corp are associated (or correlated) with Etron Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Etron Technology has no effect on the direction of Faraday Technology i.e., Faraday Technology and Etron Technology go up and down completely randomly.

Pair Corralation between Faraday Technology and Etron Technology

Assuming the 90 days trading horizon Faraday Technology Corp is expected to under-perform the Etron Technology. But the stock apears to be less risky and, when comparing its historical volatility, Faraday Technology Corp is 1.12 times less risky than Etron Technology. The stock trades about -0.09 of its potential returns per unit of risk. The Etron Technology is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  3,735  in Etron Technology on September 28, 2024 and sell it today you would lose (195.00) from holding Etron Technology or give up 5.22% of portfolio value over 90 days.

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

Faraday Technology Corp  vs.  Etron Technology

Faraday Technology Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Faraday Technology Corp 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.

Etron Technology

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Etron Technology has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Etron Technology 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 Faraday Technology and Etron Technology

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

The idea behind Faraday Technology Corp and Etron Technology 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.