Correlation Between Elmos Semiconductor and IDEXX Laboratories

Can any of the company-specific risk be diversified away by investing in both Elmos Semiconductor and IDEXX Laboratories 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 Elmos Semiconductor and IDEXX Laboratories into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Elmos Semiconductor SE and IDEXX Laboratories, you can compare the effects of market volatilities on Elmos Semiconductor and IDEXX Laboratories 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 Elmos Semiconductor with a short position of IDEXX Laboratories. Check out your portfolio center. Please also check ongoing floating volatility patterns of Elmos Semiconductor and IDEXX Laboratories.

Diversification Opportunities for Elmos Semiconductor and IDEXX Laboratories

0.27

Correlation Coefficient

Elmos Semiconductor  IDEXX Laboratories

Modest diversification

The 3 months correlation between Elmos and IDEXX is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Elmos Semiconductor SE and IDEXX Laboratories in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IDEXX Laboratories and Elmos Semiconductor 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 Elmos Semiconductor SE are associated (or correlated) with IDEXX Laboratories. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IDEXX Laboratories has no effect on the direction of Elmos Semiconductor i.e., Elmos Semiconductor and IDEXX Laboratories go up and down completely randomly.

Pair Corralation between Elmos Semiconductor and IDEXX Laboratories

Assuming the 90 days trading horizon Elmos Semiconductor SE is expected to generate 2.07 times more return on investment than IDEXX Laboratories. However, Elmos Semiconductor is 2.07 times more volatile than IDEXX Laboratories. It trades about 0.13 of its potential returns per unit of risk. IDEXX Laboratories is currently generating about -0.01 per unit of risk. If you would invest  6,030  in Elmos Semiconductor SE on October 25, 2024 and sell it today you would earn a total of  1,600  from holding Elmos Semiconductor SE or generate 26.53% return on investment over 90 days.

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

Elmos Semiconductor SE  vs.  IDEXX Laboratories

Elmos Semiconductor

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Elmos Semiconductor SE are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain technical and fundamental indicators, Elmos Semiconductor unveiled solid returns over the last few months and may actually be approaching a breakup point.

IDEXX Laboratories

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Elmos Semiconductor and IDEXX Laboratories

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

The idea behind Elmos Semiconductor SE and IDEXX Laboratories 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.

Check out your portfolio center.

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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.