Correlation Between CMC Magnetics and Accton Technology

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

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

Diversification Opportunities for CMC Magnetics and Accton Technology

-0.53

Correlation Coefficient

CMC Magnetics  Accton Technology

Excellent diversification

The 3 months correlation between CMC and Accton is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding CMC Magnetics Corp and Accton Technology Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Accton Technology Corp and CMC Magnetics 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 CMC Magnetics Corp are associated (or correlated) with Accton Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Accton Technology Corp has no effect on the direction of CMC Magnetics i.e., CMC Magnetics and Accton Technology go up and down completely randomly.

Pair Corralation between CMC Magnetics and Accton Technology

Assuming the 90 days trading horizon CMC Magnetics is expected to generate 2.67 times less return on investment than Accton Technology. But when comparing it to its historical volatility, CMC Magnetics Corp is 1.29 times less risky than Accton Technology. It trades about 0.04 of its potential returns per unit of risk. Accton Technology Corp is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  28,988  in Accton Technology Corp on December 5, 2024 and sell it today you would earn a total of  39,112  from holding Accton Technology Corp or generate 134.92% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	99.79%
Values	Daily Returns

CMC Magnetics Corp  vs.  Accton Technology Corp

CMC Magnetics Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days CMC Magnetics Corp 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.

Accton Technology Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Accton Technology Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Accton Technology 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 CMC Magnetics and Accton Technology

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

The idea behind CMC Magnetics Corp and Accton Technology Corp 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.