Correlation Between Realtek Semiconductor and Ardentec

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

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

Diversification Opportunities for Realtek Semiconductor and Ardentec

-0.54

Correlation Coefficient

Realtek Semiconductor  Ardentec

Excellent diversification

The 3 months correlation between Realtek and Ardentec is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Realtek Semiconductor Corp and Ardentec in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ardentec and Realtek Semiconductor 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 Realtek Semiconductor Corp are associated (or correlated) with Ardentec. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ardentec has no effect on the direction of Realtek Semiconductor i.e., Realtek Semiconductor and Ardentec go up and down completely randomly.

Pair Corralation between Realtek Semiconductor and Ardentec

Assuming the 90 days trading horizon Realtek Semiconductor Corp is expected to generate 0.74 times more return on investment than Ardentec. However, Realtek Semiconductor Corp is 1.35 times less risky than Ardentec. It trades about 0.13 of its potential returns per unit of risk. Ardentec is currently generating about 0.01 per unit of risk. If you would invest  48,000  in Realtek Semiconductor Corp on October 9, 2024 and sell it today you would earn a total of  6,000  from holding Realtek Semiconductor Corp or generate 12.5% return on investment over 90 days.

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

Realtek Semiconductor Corp  vs.  Ardentec

Realtek Semiconductor

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Realtek Semiconductor Corp are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Realtek Semiconductor may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Ardentec

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ardentec has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Ardentec 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 Realtek Semiconductor and Ardentec

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

The idea behind Realtek Semiconductor Corp and Ardentec 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.

Check out your portfolio center.

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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.