Correlation Between Advantech and Kingstate Electronics

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

By analyzing existing cross correlation between Advantech Co and Kingstate Electronics, you can compare the effects of market volatilities on Advantech and Kingstate Electronics 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 Kingstate Electronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Advantech and Kingstate Electronics.

Diversification Opportunities for Advantech and Kingstate Electronics

-0.74

Correlation Coefficient

Advantech  Kingstate Electronics

Pay attention - limited upside

The 3 months correlation between Advantech and Kingstate is -0.74. Overlapping area represents the amount of risk that can be diversified away by holding Advantech Co and Kingstate Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kingstate Electronics 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 Kingstate Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kingstate Electronics has no effect on the direction of Advantech i.e., Advantech and Kingstate Electronics go up and down completely randomly.

Pair Corralation between Advantech and Kingstate Electronics

Assuming the 90 days trading horizon Advantech Co is expected to generate 0.96 times more return on investment than Kingstate Electronics. However, Advantech Co is 1.04 times less risky than Kingstate Electronics. It trades about 0.0 of its potential returns per unit of risk. Kingstate Electronics is currently generating about -0.01 per unit of risk. If you would invest  34,950  in Advantech Co on September 23, 2024 and sell it today you would lose (1,050) from holding Advantech Co or give up 3.0% of portfolio value over 90 days.

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

Advantech Co  vs.  Kingstate Electronics

Advantech

Risk-Adjusted Performance

1 of 100

Weak

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

Kingstate Electronics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kingstate Electronics has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Advantech and Kingstate Electronics

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

The idea behind Advantech Co and Kingstate Electronics 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.