Correlation Between Elin Electronics and Generic Engineering

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

By analyzing existing cross correlation between Elin Electronics Limited and Generic Engineering Construction, you can compare the effects of market volatilities on Elin Electronics and Generic Engineering 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 Elin Electronics with a short position of Generic Engineering. Check out your portfolio center. Please also check ongoing floating volatility patterns of Elin Electronics and Generic Engineering.

Diversification Opportunities for Elin Electronics and Generic Engineering

0.45

Correlation Coefficient

Elin Electronics  Generic Engineering

Very weak diversification

The 3 months correlation between Elin and Generic is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Elin Electronics Limited and Generic Engineering Constructi in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Generic Engineering and Elin 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 Elin Electronics Limited are associated (or correlated) with Generic Engineering. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Generic Engineering has no effect on the direction of Elin Electronics i.e., Elin Electronics and Generic Engineering go up and down completely randomly.

Pair Corralation between Elin Electronics and Generic Engineering

Assuming the 90 days trading horizon Elin Electronics is expected to generate 2.67 times less return on investment than Generic Engineering. But when comparing it to its historical volatility, Elin Electronics Limited is 1.39 times less risky than Generic Engineering. It trades about 0.15 of its potential returns per unit of risk. Generic Engineering Construction is currently generating about 0.28 of returns per unit of risk over similar time horizon. If you would invest  3,841  in Generic Engineering Construction on September 22, 2024 and sell it today you would earn a total of  729.00  from holding Generic Engineering Construction or generate 18.98% return on investment over 90 days.

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

Elin Electronics Limited  vs.  Generic Engineering Constructi

Elin Electronics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Elin Electronics Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Generic Engineering

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Generic Engineering Construction are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unsteady fundamental indicators, Generic Engineering may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Elin Electronics and Generic Engineering

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

The idea behind Elin Electronics Limited and Generic Engineering Construction 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.