Correlation Between BenQ Materials and Darfon Electronics

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

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

Diversification Opportunities for BenQ Materials and Darfon Electronics

0.39

Correlation Coefficient

BenQ Materials  Darfon Electronics

Weak diversification

The 3 months correlation between BenQ and Darfon is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding BenQ Materials Corp and Darfon Electronics Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Darfon Electronics Corp and BenQ Materials 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 BenQ Materials Corp are associated (or correlated) with Darfon Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Darfon Electronics Corp has no effect on the direction of BenQ Materials i.e., BenQ Materials and Darfon Electronics go up and down completely randomly.

Pair Corralation between BenQ Materials and Darfon Electronics

Assuming the 90 days trading horizon BenQ Materials is expected to generate 11.75 times less return on investment than Darfon Electronics. But when comparing it to its historical volatility, BenQ Materials Corp is 1.01 times less risky than Darfon Electronics. It trades about 0.0 of its potential returns per unit of risk. Darfon Electronics Corp is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  3,850  in Darfon Electronics Corp on October 4, 2024 and sell it today you would earn a total of  515.00  from holding Darfon Electronics Corp or generate 13.38% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.79%
Values	Daily Returns

BenQ Materials Corp  vs.  Darfon Electronics Corp

BenQ Materials Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BenQ Materials Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, BenQ Materials is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

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.

Pair Trading with BenQ Materials and Darfon Electronics

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

The idea behind BenQ Materials Corp and Darfon Electronics 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.