Correlation Between Advanced Ceramic and Delta Electronics

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

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

Diversification Opportunities for Advanced Ceramic and Delta Electronics

0.17

Correlation Coefficient

Advanced Ceramic  Delta Electronics

Average diversification

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

Pair Corralation between Advanced Ceramic and Delta Electronics

Assuming the 90 days trading horizon Advanced Ceramic is expected to generate 1.88 times less return on investment than Delta Electronics. In addition to that, Advanced Ceramic is 1.58 times more volatile than Delta Electronics. It trades about 0.03 of its total potential returns per unit of risk. Delta Electronics is currently generating about 0.1 per unit of volatility. If you would invest  38,550  in Delta Electronics on September 15, 2024 and sell it today you would earn a total of  3,750  from holding Delta Electronics or generate 9.73% return on investment over 90 days.

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

Advanced Ceramic X  vs.  Delta Electronics

Advanced Ceramic X

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Advanced Ceramic X are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. 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.

Delta Electronics

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Delta Electronics are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Delta Electronics may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Advanced Ceramic and Delta Electronics

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

The idea behind Advanced Ceramic X and Delta Electronics 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.