Correlation Between Microelectronics and Actron Technology

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

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

Diversification Opportunities for Microelectronics and Actron Technology

-0.2

Correlation Coefficient

Microelectronics  Actron Technology

Good diversification

The 3 months correlation between Microelectronics and Actron is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Microelectronics Technology and Actron Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Actron Technology and Microelectronics 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 Microelectronics Technology are associated (or correlated) with Actron Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Actron Technology has no effect on the direction of Microelectronics i.e., Microelectronics and Actron Technology go up and down completely randomly.

Pair Corralation between Microelectronics and Actron Technology

Assuming the 90 days trading horizon Microelectronics Technology is expected to generate 1.41 times more return on investment than Actron Technology. However, Microelectronics is 1.41 times more volatile than Actron Technology. It trades about 0.02 of its potential returns per unit of risk. Actron Technology is currently generating about -0.07 per unit of risk. If you would invest  2,970  in Microelectronics Technology on September 17, 2024 and sell it today you would earn a total of  60.00  from holding Microelectronics Technology or generate 2.02% return on investment over 90 days.

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

Microelectronics Technology  vs.  Actron Technology

Microelectronics Tec

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Microelectronics Technology are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Microelectronics is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Actron Technology

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Actron Technology has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Pair Trading with Microelectronics and Actron Technology

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

The idea behind Microelectronics Technology and Actron Technology 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.