Correlation Between E Ink and ABC Taiwan

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

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

Diversification Opportunities for E Ink and ABC Taiwan

0.41

Correlation Coefficient

E Ink  ABC Taiwan

Very weak diversification

The 3 months correlation between 8069 and ABC is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding E Ink Holdings and ABC Taiwan Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ABC Taiwan Electronics and E Ink 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 E Ink Holdings are associated (or correlated) with ABC Taiwan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ABC Taiwan Electronics has no effect on the direction of E Ink i.e., E Ink and ABC Taiwan go up and down completely randomly.

Pair Corralation between E Ink and ABC Taiwan

Assuming the 90 days trading horizon E Ink Holdings is expected to generate 1.13 times more return on investment than ABC Taiwan. However, E Ink is 1.13 times more volatile than ABC Taiwan Electronics. It trades about 0.03 of its potential returns per unit of risk. ABC Taiwan Electronics is currently generating about -0.16 per unit of risk. If you would invest  27,300  in E Ink Holdings on October 22, 2024 and sell it today you would earn a total of  200.00  from holding E Ink Holdings or generate 0.73% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.24%
Values	Daily Returns

E Ink Holdings  vs.  ABC Taiwan Electronics

E Ink Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days E Ink Holdings 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.

ABC Taiwan Electronics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ABC Taiwan Electronics 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 E Ink and ABC Taiwan

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

The idea behind E Ink Holdings and ABC Taiwan 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.