Correlation Between Emerging Display and Advanced Ceramic

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

By analyzing existing cross correlation between Emerging Display Technologies and Advanced Ceramic X, you can compare the effects of market volatilities on Emerging Display and Advanced Ceramic 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 Emerging Display with a short position of Advanced Ceramic. Check out your portfolio center. Please also check ongoing floating volatility patterns of Emerging Display and Advanced Ceramic.

Diversification Opportunities for Emerging Display and Advanced Ceramic

0.17

Correlation Coefficient

Emerging Display  Advanced Ceramic

Average diversification

The 3 months correlation between Emerging and Advanced is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Emerging Display Technologies and Advanced Ceramic X in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Advanced Ceramic X and Emerging Display 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 Emerging Display Technologies are associated (or correlated) with Advanced Ceramic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Advanced Ceramic X has no effect on the direction of Emerging Display i.e., Emerging Display and Advanced Ceramic go up and down completely randomly.

Pair Corralation between Emerging Display and Advanced Ceramic

Assuming the 90 days trading horizon Emerging Display Technologies is expected to generate 1.33 times more return on investment than Advanced Ceramic. However, Emerging Display is 1.33 times more volatile than Advanced Ceramic X. It trades about 0.05 of its potential returns per unit of risk. Advanced Ceramic X is currently generating about -0.3 per unit of risk. If you would invest  2,620  in Emerging Display Technologies on October 25, 2024 and sell it today you would earn a total of  55.00  from holding Emerging Display Technologies or generate 2.1% return on investment over 90 days.

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

Emerging Display Technologies  vs.  Advanced Ceramic X

Emerging Display Tec

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Emerging Display Technologies are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Emerging Display is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Advanced Ceramic X

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Advanced Ceramic X has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Advanced Ceramic 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 Emerging Display and Advanced Ceramic

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

The idea behind Emerging Display Technologies and Advanced Ceramic X 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.