Correlation Between Darfon Electronics and Ruentex Engineering

Can any of the company-specific risk be diversified away by investing in both Darfon Electronics and Ruentex Engineering 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 Darfon Electronics and Ruentex Engineering into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Darfon Electronics Corp and Ruentex Engineering Construction, you can compare the effects of market volatilities on Darfon Electronics and Ruentex Engineering 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 Darfon Electronics with a short position of Ruentex Engineering. Check out your portfolio center. Please also check ongoing floating volatility patterns of Darfon Electronics and Ruentex Engineering.

Diversification Opportunities for Darfon Electronics and Ruentex Engineering

-0.68

Correlation Coefficient

Darfon Electronics  Ruentex Engineering

Excellent diversification

The 3 months correlation between Darfon and Ruentex is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding Darfon Electronics Corp and Ruentex Engineering Constructi in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ruentex Engineering and Darfon Electronics 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 Darfon Electronics Corp are associated (or correlated) with Ruentex Engineering. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ruentex Engineering has no effect on the direction of Darfon Electronics i.e., Darfon Electronics and Ruentex Engineering go up and down completely randomly.

Pair Corralation between Darfon Electronics and Ruentex Engineering

Assuming the 90 days trading horizon Darfon Electronics is expected to generate 6.63 times less return on investment than Ruentex Engineering. But when comparing it to its historical volatility, Darfon Electronics Corp is 1.04 times less risky than Ruentex Engineering. It trades about 0.02 of its potential returns per unit of risk. Ruentex Engineering Construction is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  14,850  in Ruentex Engineering Construction on October 23, 2024 and sell it today you would earn a total of  650.00  from holding Ruentex Engineering Construction or generate 4.38% return on investment over 90 days.

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

Darfon Electronics Corp  vs.  Ruentex Engineering Constructi

Darfon Electronics Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Darfon Electronics 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.

Ruentex Engineering

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Ruentex Engineering Construction are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Ruentex Engineering may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Darfon Electronics and Ruentex Engineering

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

The idea behind Darfon Electronics Corp and Ruentex Engineering Construction 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.