Correlation Between A Tech and EV Advanced

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

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

Diversification Opportunities for A Tech and EV Advanced

0.52

Correlation Coefficient

A Tech  EV Advanced

Very weak diversification

The 3 months correlation between 071670 and 131400 is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding A Tech Solution Co and EV Advanced Material in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EV Advanced Material and A Tech 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 A Tech Solution Co are associated (or correlated) with EV Advanced. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EV Advanced Material has no effect on the direction of A Tech i.e., A Tech and EV Advanced go up and down completely randomly.

Pair Corralation between A Tech and EV Advanced

Assuming the 90 days trading horizon A Tech Solution Co is expected to generate 1.06 times more return on investment than EV Advanced. However, A Tech is 1.06 times more volatile than EV Advanced Material. It trades about 0.07 of its potential returns per unit of risk. EV Advanced Material is currently generating about -0.02 per unit of risk. If you would invest  549,000  in A Tech Solution Co on December 23, 2024 and sell it today you would earn a total of  47,000  from holding A Tech Solution Co or generate 8.56% return on investment over 90 days.

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

A Tech Solution Co  vs.  EV Advanced Material

A Tech Solution

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in A Tech Solution Co are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, A Tech may actually be approaching a critical reversion point that can send shares even higher in April 2025.

EV Advanced Material

Risk-Adjusted Performance

Very Weak

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

Pair Trading with A Tech and EV Advanced

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

The idea behind A Tech Solution Co and EV Advanced Material 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.