Correlation Between Chipbond Technology and Elite Material

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

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

Diversification Opportunities for Chipbond Technology and Elite Material

0.12

Correlation Coefficient

Chipbond Technology  Elite Material

Average diversification

The 3 months correlation between Chipbond and Elite is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Chipbond Technology and Elite Material Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Elite Material and Chipbond Technology 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 Chipbond Technology are associated (or correlated) with Elite Material. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Elite Material has no effect on the direction of Chipbond Technology i.e., Chipbond Technology and Elite Material go up and down completely randomly.

Pair Corralation between Chipbond Technology and Elite Material

Assuming the 90 days trading horizon Chipbond Technology is expected to under-perform the Elite Material. But the stock apears to be less risky and, when comparing its historical volatility, Chipbond Technology is 1.84 times less risky than Elite Material. The stock trades about -0.02 of its potential returns per unit of risk. The Elite Material Co is currently generating about 0.32 of returns per unit of risk over similar time horizon. If you would invest  43,150  in Elite Material Co on October 7, 2024 and sell it today you would earn a total of  17,250  from holding Elite Material Co or generate 39.98% return on investment over 90 days.

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

Chipbond Technology  vs.  Elite Material Co

Chipbond Technology

Risk-Adjusted Performance

0 of 100

Very Weak

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

Elite Material

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Elite Material Co are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Elite Material showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Chipbond Technology and Elite Material

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

The idea behind Chipbond Technology and Elite Material 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.