Correlation Between Acer Incorporated and Seiko Epson

Can any of the company-specific risk be diversified away by investing in both Acer Incorporated and Seiko Epson 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 Acer Incorporated and Seiko Epson into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Acer Incorporated and Seiko Epson, you can compare the effects of market volatilities on Acer Incorporated and Seiko Epson 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 Acer Incorporated with a short position of Seiko Epson. Check out your portfolio center. Please also check ongoing floating volatility patterns of Acer Incorporated and Seiko Epson.

Diversification Opportunities for Acer Incorporated and Seiko Epson

0.15

Correlation Coefficient

Acer Incorporated  Seiko Epson

Average diversification

The 3 months correlation between Acer and Seiko is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Acer Incorporated and Seiko Epson in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Seiko Epson and Acer Incorporated 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 Acer Incorporated are associated (or correlated) with Seiko Epson. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Seiko Epson has no effect on the direction of Acer Incorporated i.e., Acer Incorporated and Seiko Epson go up and down completely randomly.

Pair Corralation between Acer Incorporated and Seiko Epson

Assuming the 90 days trading horizon Acer Incorporated is expected to generate 3.03 times more return on investment than Seiko Epson. However, Acer Incorporated is 3.03 times more volatile than Seiko Epson. It trades about 0.0 of its potential returns per unit of risk. Seiko Epson is currently generating about -0.08 per unit of risk. If you would invest  460.00  in Acer Incorporated on December 20, 2024 and sell it today you would lose (40.00) from holding Acer Incorporated or give up 8.7% of portfolio value over 90 days.

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

Acer Incorporated  vs.  Seiko Epson

Acer Incorporated

Risk-Adjusted Performance

Insignificant

Over the last 90 days Acer Incorporated has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Acer Incorporated is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Seiko Epson

Risk-Adjusted Performance

Very Weak

Over the last 90 days Seiko Epson has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Acer Incorporated and Seiko Epson

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

The idea behind Acer Incorporated and Seiko Epson 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.