Correlation Between Everdisplay Optronics and Senci Electric

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

By analyzing existing cross correlation between Everdisplay Optronics Shanghai and Senci Electric Machinery, you can compare the effects of market volatilities on Everdisplay Optronics and Senci Electric 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 Everdisplay Optronics with a short position of Senci Electric. Check out your portfolio center. Please also check ongoing floating volatility patterns of Everdisplay Optronics and Senci Electric.

Diversification Opportunities for Everdisplay Optronics and Senci Electric

0.61

Correlation Coefficient

Everdisplay Optronics  Senci Electric

Poor diversification

The 3 months correlation between Everdisplay and Senci is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Everdisplay Optronics Shanghai and Senci Electric Machinery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Senci Electric Machinery and Everdisplay Optronics 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 Everdisplay Optronics Shanghai are associated (or correlated) with Senci Electric. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Senci Electric Machinery has no effect on the direction of Everdisplay Optronics i.e., Everdisplay Optronics and Senci Electric go up and down completely randomly.

Pair Corralation between Everdisplay Optronics and Senci Electric

Assuming the 90 days trading horizon Everdisplay Optronics Shanghai is expected to under-perform the Senci Electric. But the stock apears to be less risky and, when comparing its historical volatility, Everdisplay Optronics Shanghai is 1.72 times less risky than Senci Electric. The stock trades about -0.01 of its potential returns per unit of risk. The Senci Electric Machinery is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  1,662  in Senci Electric Machinery on September 29, 2024 and sell it today you would earn a total of  137.00  from holding Senci Electric Machinery or generate 8.24% return on investment over 90 days.

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

Everdisplay Optronics Shanghai  vs.  Senci Electric Machinery

Everdisplay Optronics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Everdisplay Optronics Shanghai has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Everdisplay Optronics is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Senci Electric Machinery

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Senci Electric Machinery are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Senci Electric sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Everdisplay Optronics and Senci Electric

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

The idea behind Everdisplay Optronics Shanghai and Senci Electric Machinery 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.