Correlation Between Taisol Electronics and Elan Microelectronics

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

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

Diversification Opportunities for Taisol Electronics and Elan Microelectronics

0.17

Correlation Coefficient

Taisol Electronics  Elan Microelectronics

Average diversification

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

Pair Corralation between Taisol Electronics and Elan Microelectronics

Assuming the 90 days trading horizon Taisol Electronics Co is expected to under-perform the Elan Microelectronics. But the stock apears to be less risky and, when comparing its historical volatility, Taisol Electronics Co is 1.05 times less risky than Elan Microelectronics. The stock trades about -0.09 of its potential returns per unit of risk. The Elan Microelectronics Corp is currently generating about -0.08 of returns per unit of risk over similar time horizon. If you would invest  15,300  in Elan Microelectronics Corp on December 29, 2024 and sell it today you would lose (1,500) from holding Elan Microelectronics Corp or give up 9.8% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.25%
Values	Daily Returns

Taisol Electronics Co  vs.  Elan Microelectronics Corp

Taisol Electronics

Risk-Adjusted Performance

Very Weak

Over the last 90 days Taisol Electronics Co 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.

Elan Microelectronics

Risk-Adjusted Performance

Very Weak

Over the last 90 days Elan Microelectronics 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.

Pair Trading with Taisol Electronics and Elan Microelectronics

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

The idea behind Taisol Electronics Co and Elan Microelectronics Corp 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.