Correlation Between Plastron Precision and Elan Microelectronics

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

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

Diversification Opportunities for Plastron Precision and Elan Microelectronics

0.28

Correlation Coefficient

Plastron Precision  Elan Microelectronics

Modest diversification

The 3 months correlation between Plastron and Elan is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Plastron Precision 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 Plastron Precision 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 Plastron Precision 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 Plastron Precision i.e., Plastron Precision and Elan Microelectronics go up and down completely randomly.

Pair Corralation between Plastron Precision and Elan Microelectronics

Assuming the 90 days trading horizon Plastron Precision Co is expected to generate 0.6 times more return on investment than Elan Microelectronics. However, Plastron Precision Co is 1.68 times less risky than Elan Microelectronics. It trades about 0.28 of its potential returns per unit of risk. Elan Microelectronics Corp is currently generating about -0.08 per unit of risk. If you would invest  1,485  in Plastron Precision Co on December 30, 2024 and sell it today you would earn a total of  290.00  from holding Plastron Precision Co or generate 19.53% return on investment over 90 days.

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

Plastron Precision Co  vs.  Elan Microelectronics Corp

Plastron Precision

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Plastron Precision Co are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Plastron Precision showed solid returns over the last few months and may actually be approaching a breakup point.

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 Plastron Precision and Elan Microelectronics

The main advantage of trading using opposite Plastron Precision and Elan Microelectronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Plastron Precision 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 Plastron Precision 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.