Correlation Between FCS Software and Elin Electronics

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

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

Diversification Opportunities for FCS Software and Elin Electronics

0.66

Correlation Coefficient

FCS Software  Elin Electronics

Poor diversification

The 3 months correlation between FCS and Elin is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding FCS Software Solutions and Elin Electronics Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Elin Electronics and FCS Software 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 FCS Software Solutions are associated (or correlated) with Elin Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Elin Electronics has no effect on the direction of FCS Software i.e., FCS Software and Elin Electronics go up and down completely randomly.

Pair Corralation between FCS Software and Elin Electronics

Assuming the 90 days trading horizon FCS Software is expected to generate 3.27 times less return on investment than Elin Electronics. In addition to that, FCS Software is 1.24 times more volatile than Elin Electronics Limited. It trades about 0.02 of its total potential returns per unit of risk. Elin Electronics Limited is currently generating about 0.09 per unit of volatility. If you would invest  21,883  in Elin Electronics Limited on September 5, 2024 and sell it today you would earn a total of  1,015  from holding Elin Electronics Limited or generate 4.64% return on investment over 90 days.

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

FCS Software Solutions  vs.  Elin Electronics Limited

FCS Software Solutions

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days FCS Software Solutions has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, FCS Software is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

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 latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with FCS Software and Elin Electronics

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

The idea behind FCS Software Solutions and Elin Electronics Limited 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.