Correlation Between Japan Asia and Elmos Semiconductor

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

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

Diversification Opportunities for Japan Asia and Elmos Semiconductor

-0.49

Correlation Coefficient

Japan Asia  Elmos Semiconductor

Very good diversification

The 3 months correlation between Japan and Elmos is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Japan Asia Investment and Elmos Semiconductor SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Elmos Semiconductor and Japan Asia 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 Japan Asia Investment are associated (or correlated) with Elmos Semiconductor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Elmos Semiconductor has no effect on the direction of Japan Asia i.e., Japan Asia and Elmos Semiconductor go up and down completely randomly.

Pair Corralation between Japan Asia and Elmos Semiconductor

Assuming the 90 days horizon Japan Asia Investment is expected to generate 0.98 times more return on investment than Elmos Semiconductor. However, Japan Asia Investment is 1.02 times less risky than Elmos Semiconductor. It trades about 0.18 of its potential returns per unit of risk. Elmos Semiconductor SE is currently generating about 0.01 per unit of risk. If you would invest  122.00  in Japan Asia Investment on December 21, 2024 and sell it today you would earn a total of  39.00  from holding Japan Asia Investment or generate 31.97% return on investment over 90 days.

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

Japan Asia Investment  vs.  Elmos Semiconductor SE

Japan Asia Investment

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Japan Asia Investment are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Japan Asia reported solid returns over the last few months and may actually be approaching a breakup point.

Elmos Semiconductor

Risk-Adjusted Performance

Weak

Over the last 90 days Elmos Semiconductor SE has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable technical and fundamental indicators, Elmos Semiconductor is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Japan Asia and Elmos Semiconductor

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

The idea behind Japan Asia Investment and Elmos Semiconductor SE 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.