Correlation Between InnoDisk and Greatek Electronics

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

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

Diversification Opportunities for InnoDisk and Greatek Electronics

0.18

Correlation Coefficient

InnoDisk  Greatek Electronics

Average diversification

The 3 months correlation between InnoDisk and Greatek is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding InnoDisk and Greatek Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Greatek Electronics and InnoDisk 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 InnoDisk are associated (or correlated) with Greatek Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Greatek Electronics has no effect on the direction of InnoDisk i.e., InnoDisk and Greatek Electronics go up and down completely randomly.

Pair Corralation between InnoDisk and Greatek Electronics

Assuming the 90 days trading horizon InnoDisk is expected to under-perform the Greatek Electronics. In addition to that, InnoDisk is 1.21 times more volatile than Greatek Electronics. It trades about -0.15 of its total potential returns per unit of risk. Greatek Electronics is currently generating about -0.04 per unit of volatility. If you would invest  6,320  in Greatek Electronics on October 7, 2024 and sell it today you would lose (500.00) from holding Greatek Electronics or give up 7.91% of portfolio value over 90 days.

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

InnoDisk  vs.  Greatek Electronics

InnoDisk

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days InnoDisk 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.

Greatek Electronics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Greatek Electronics has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Greatek Electronics is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with InnoDisk and Greatek Electronics

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

The idea behind InnoDisk and Greatek 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.

Check out your portfolio center.

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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.