Correlation Between Global Lighting and Emerging Display

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

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

Diversification Opportunities for Global Lighting and Emerging Display

-0.54

Correlation Coefficient

Global Lighting  Emerging Display

Excellent diversification

The 3 months correlation between Global and Emerging is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Global Lighting Technologies and Emerging Display Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Emerging Display Tec and Global Lighting 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 Global Lighting Technologies are associated (or correlated) with Emerging Display. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Emerging Display Tec has no effect on the direction of Global Lighting i.e., Global Lighting and Emerging Display go up and down completely randomly.

Pair Corralation between Global Lighting and Emerging Display

Assuming the 90 days trading horizon Global Lighting Technologies is expected to under-perform the Emerging Display. But the stock apears to be less risky and, when comparing its historical volatility, Global Lighting Technologies is 1.73 times less risky than Emerging Display. The stock trades about -0.43 of its potential returns per unit of risk. The Emerging Display Technologies is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  2,615  in Emerging Display Technologies on October 22, 2024 and sell it today you would earn a total of  80.00  from holding Emerging Display Technologies or generate 3.06% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Global Lighting Technologies  vs.  Emerging Display Technologies

Global Lighting Tech

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Global Lighting Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in February 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Emerging Display Tec

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Emerging Display Technologies are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Emerging Display may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Global Lighting and Emerging Display

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

The idea behind Global Lighting Technologies and Emerging Display Technologies 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.