Correlation Between Advantech and Ablerex Electronics

Can any of the company-specific risk be diversified away by investing in both Advantech and Ablerex 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 Ablerex 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 Ablerex Electronics Co, you can compare the effects of market volatilities on Advantech and Ablerex 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 Ablerex Electronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Advantech and Ablerex Electronics.

Diversification Opportunities for Advantech and Ablerex Electronics

0.75

Correlation Coefficient

Advantech  Ablerex Electronics

Poor diversification

The 3 months correlation between Advantech and Ablerex is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Advantech Co and Ablerex Electronics Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ablerex 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 Ablerex Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ablerex Electronics has no effect on the direction of Advantech i.e., Advantech and Ablerex Electronics go up and down completely randomly.

Pair Corralation between Advantech and Ablerex Electronics

Assuming the 90 days trading horizon Advantech Co is expected to under-perform the Ablerex Electronics. But the stock apears to be less risky and, when comparing its historical volatility, Advantech Co is 1.94 times less risky than Ablerex Electronics. The stock trades about -0.07 of its potential returns per unit of risk. The Ablerex Electronics Co is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  4,730  in Ablerex Electronics Co on September 24, 2024 and sell it today you would lose (45.00) from holding Ablerex Electronics Co or give up 0.95% of portfolio value over 90 days.

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

Advantech Co  vs.  Ablerex Electronics Co

Advantech

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Advantech Co are ranked lower than 2 (%) 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.

Ablerex Electronics

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Ablerex Electronics Co are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Ablerex Electronics may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Advantech and Ablerex Electronics

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

The idea behind Advantech Co and Ablerex Electronics Co 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.