Correlation Between Darfon Electronics and CTCI Corp

Can any of the company-specific risk be diversified away by investing in both Darfon Electronics and CTCI Corp 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 CTCI Corp 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 CTCI Corp, you can compare the effects of market volatilities on Darfon Electronics and CTCI Corp 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 CTCI Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Darfon Electronics and CTCI Corp.

Diversification Opportunities for Darfon Electronics and CTCI Corp

0.67

Correlation Coefficient

Darfon Electronics  CTCI Corp

Poor diversification

The 3 months correlation between Darfon and CTCI is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Darfon Electronics Corp and CTCI Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CTCI Corp 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 CTCI Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CTCI Corp has no effect on the direction of Darfon Electronics i.e., Darfon Electronics and CTCI Corp go up and down completely randomly.

Pair Corralation between Darfon Electronics and CTCI Corp

Assuming the 90 days trading horizon Darfon Electronics Corp is expected to under-perform the CTCI Corp. In addition to that, Darfon Electronics is 1.36 times more volatile than CTCI Corp. It trades about -0.03 of its total potential returns per unit of risk. CTCI Corp is currently generating about -0.01 per unit of volatility. If you would invest  4,190  in CTCI Corp on October 7, 2024 and sell it today you would lose (280.00) from holding CTCI Corp or give up 6.68% of portfolio value over 90 days.

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

Darfon Electronics Corp  vs.  CTCI Corp

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 abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in February 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

CTCI Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CTCI Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in February 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Darfon Electronics and CTCI Corp

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

The idea behind Darfon Electronics Corp and CTCI 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.