Correlation Between Primax Electronics and Chicony Electronics

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

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

Diversification Opportunities for Primax Electronics and Chicony Electronics

0.69

Correlation Coefficient

Primax Electronics  Chicony Electronics

Poor diversification

The 3 months correlation between Primax and Chicony is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Primax Electronics and Chicony Electronics Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chicony Electronics and Primax 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 Primax Electronics are associated (or correlated) with Chicony Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chicony Electronics has no effect on the direction of Primax Electronics i.e., Primax Electronics and Chicony Electronics go up and down completely randomly.

Pair Corralation between Primax Electronics and Chicony Electronics

Assuming the 90 days trading horizon Primax Electronics is expected to generate 1.52 times less return on investment than Chicony Electronics. But when comparing it to its historical volatility, Primax Electronics is 1.15 times less risky than Chicony Electronics. It trades about 0.09 of its potential returns per unit of risk. Chicony Electronics Co is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  14,800  in Chicony Electronics Co on December 25, 2024 and sell it today you would earn a total of  1,900  from holding Chicony Electronics Co or generate 12.84% return on investment over 90 days.

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

Primax Electronics  vs.  Chicony Electronics Co

Primax Electronics

Risk-Adjusted Performance

OK

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

Chicony Electronics

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Chicony Electronics Co are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Chicony Electronics showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Primax Electronics and Chicony Electronics

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

The idea behind Primax Electronics and Chicony 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.