Correlation Between Advantech and IEI Integration

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

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

Diversification Opportunities for Advantech and IEI Integration

0.6

Correlation Coefficient

Advantech  IEI Integration

Poor diversification

The 3 months correlation between Advantech and IEI is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Advantech Co and IEI Integration Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IEI Integration Corp and Advantech 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 Advantech Co are associated (or correlated) with IEI Integration. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IEI Integration Corp has no effect on the direction of Advantech i.e., Advantech and IEI Integration go up and down completely randomly.

Pair Corralation between Advantech and IEI Integration

Assuming the 90 days trading horizon Advantech is expected to generate 1.6 times less return on investment than IEI Integration. But when comparing it to its historical volatility, Advantech Co is 1.58 times less risky than IEI Integration. It trades about 0.1 of its potential returns per unit of risk. IEI Integration Corp is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  7,920  in IEI Integration Corp on December 30, 2024 and sell it today you would earn a total of  1,510  from holding IEI Integration Corp or generate 19.07% return on investment over 90 days.

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

Advantech Co  vs.  IEI Integration Corp

Advantech

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Advantech Co are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Advantech showed solid returns over the last few months and may actually be approaching a breakup point.

IEI Integration Corp

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in IEI Integration Corp are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, IEI Integration showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Advantech and IEI Integration

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

The idea behind Advantech Co and IEI Integration 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 CEOs Directory module to screen CEOs from public companies around the world.