Correlation Between ECD Automotive and Mingteng International

Can any of the company-specific risk be diversified away by investing in both ECD Automotive and Mingteng International 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 ECD Automotive and Mingteng International into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between ECD Automotive Design and Mingteng International, you can compare the effects of market volatilities on ECD Automotive and Mingteng International 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 ECD Automotive with a short position of Mingteng International. Check out your portfolio center. Please also check ongoing floating volatility patterns of ECD Automotive and Mingteng International.

Diversification Opportunities for ECD Automotive and Mingteng International

-0.47

Correlation Coefficient

ECD Automotive  Mingteng International

Very good diversification

The 3 months correlation between ECD and Mingteng is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding ECD Automotive Design and Mingteng International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mingteng International and ECD Automotive 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 ECD Automotive Design are associated (or correlated) with Mingteng International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mingteng International has no effect on the direction of ECD Automotive i.e., ECD Automotive and Mingteng International go up and down completely randomly.

Pair Corralation between ECD Automotive and Mingteng International

Given the investment horizon of 90 days ECD Automotive Design is expected to under-perform the Mingteng International. But the stock apears to be less risky and, when comparing its historical volatility, ECD Automotive Design is 2.47 times less risky than Mingteng International. The stock trades about -0.04 of its potential returns per unit of risk. The Mingteng International is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  435.00  in Mingteng International on September 3, 2024 and sell it today you would earn a total of  161.00  from holding Mingteng International or generate 37.01% return on investment over 90 days.

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

ECD Automotive Design  vs.  Mingteng International

ECD Automotive Design

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ECD Automotive Design has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Mingteng International

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Mingteng International are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very weak technical and fundamental indicators, Mingteng International displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ECD Automotive and Mingteng International

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

The idea behind ECD Automotive Design and Mingteng International 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.