Correlation Between Excellence Optoelectronic and Top Union

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

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

Diversification Opportunities for Excellence Optoelectronic and Top Union

0.03

Correlation Coefficient

Excellence Optoelectronic  Top Union

Significant diversification

The 3 months correlation between Excellence and Top is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Excellence Optoelectronic and Top Union Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Top Union Electronics and Excellence Optoelectronic 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 Excellence Optoelectronic are associated (or correlated) with Top Union. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Top Union Electronics has no effect on the direction of Excellence Optoelectronic i.e., Excellence Optoelectronic and Top Union go up and down completely randomly.

Pair Corralation between Excellence Optoelectronic and Top Union

Assuming the 90 days trading horizon Excellence Optoelectronic is expected to under-perform the Top Union. In addition to that, Excellence Optoelectronic is 2.2 times more volatile than Top Union Electronics. It trades about -0.1 of its total potential returns per unit of risk. Top Union Electronics is currently generating about 0.13 per unit of volatility. If you would invest  3,250  in Top Union Electronics on December 30, 2024 and sell it today you would earn a total of  220.00  from holding Top Union Electronics or generate 6.77% return on investment over 90 days.

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

Excellence Optoelectronic  vs.  Top Union Electronics

Excellence Optoelectronic

Risk-Adjusted Performance

Very Weak

Over the last 90 days Excellence Optoelectronic 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.

Top Union Electronics

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Top Union Electronics are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Top Union may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Excellence Optoelectronic and Top Union

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

The idea behind Excellence Optoelectronic and Top Union 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.

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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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.