Correlation Between Spolytech and A Tech

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

By analyzing existing cross correlation between Spolytech Co and A Tech Solution Co, you can compare the effects of market volatilities on Spolytech and A Tech 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 Spolytech with a short position of A Tech. Check out your portfolio center. Please also check ongoing floating volatility patterns of Spolytech and A Tech.

Diversification Opportunities for Spolytech and A Tech

0.63

Correlation Coefficient

Spolytech  A Tech

Poor diversification

The 3 months correlation between Spolytech and 071670 is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Spolytech Co and A Tech Solution Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on A Tech Solution and Spolytech 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 Spolytech Co are associated (or correlated) with A Tech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of A Tech Solution has no effect on the direction of Spolytech i.e., Spolytech and A Tech go up and down completely randomly.

Pair Corralation between Spolytech and A Tech

Assuming the 90 days trading horizon Spolytech Co is expected to generate 0.8 times more return on investment than A Tech. However, Spolytech Co is 1.26 times less risky than A Tech. It trades about -0.02 of its potential returns per unit of risk. A Tech Solution Co is currently generating about -0.02 per unit of risk. If you would invest  160,600  in Spolytech Co on October 21, 2024 and sell it today you would lose (7,000) from holding Spolytech Co or give up 4.36% of portfolio value over 90 days.

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

Spolytech Co  vs.  A Tech Solution Co

Spolytech

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Spolytech Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Spolytech is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

A Tech Solution

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days A Tech Solution Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, A Tech is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Spolytech and A Tech

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

The idea behind Spolytech Co and A Tech Solution Co 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.