Correlation Between Elitegroup Computer and AVerMedia Technologies

Can any of the company-specific risk be diversified away by investing in both Elitegroup Computer and AVerMedia Technologies 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 Elitegroup Computer and AVerMedia Technologies into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Elitegroup Computer Systems and AVerMedia Technologies, you can compare the effects of market volatilities on Elitegroup Computer and AVerMedia Technologies 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 Elitegroup Computer with a short position of AVerMedia Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Elitegroup Computer and AVerMedia Technologies.

Diversification Opportunities for Elitegroup Computer and AVerMedia Technologies

0.29

Correlation Coefficient

Elitegroup Computer  AVerMedia Technologies

Modest diversification

The 3 months correlation between Elitegroup and AVerMedia is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Elitegroup Computer Systems and AVerMedia Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AVerMedia Technologies and Elitegroup Computer 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 Elitegroup Computer Systems are associated (or correlated) with AVerMedia Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AVerMedia Technologies has no effect on the direction of Elitegroup Computer i.e., Elitegroup Computer and AVerMedia Technologies go up and down completely randomly.

Pair Corralation between Elitegroup Computer and AVerMedia Technologies

Assuming the 90 days trading horizon Elitegroup Computer is expected to generate 1.29 times less return on investment than AVerMedia Technologies. But when comparing it to its historical volatility, Elitegroup Computer Systems is 1.76 times less risky than AVerMedia Technologies. It trades about 0.13 of its potential returns per unit of risk. AVerMedia Technologies is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  4,075  in AVerMedia Technologies on March 20, 2024 and sell it today you would earn a total of  310.00  from holding AVerMedia Technologies or generate 7.61% return on investment over 90 days.

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

Elitegroup Computer Systems  vs.  AVerMedia Technologies

Elitegroup Computer

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Elitegroup Computer Systems are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Elitegroup Computer showed solid returns over the last few months and may actually be approaching a breakup point.

AVerMedia Technologies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AVerMedia Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, AVerMedia Technologies is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Elitegroup Computer and AVerMedia Technologies

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

The idea behind Elitegroup Computer Systems and AVerMedia Technologies 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.