Correlation Between Advantech and STL Technology

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

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

Diversification Opportunities for Advantech and STL Technology

0.34

Correlation Coefficient

Advantech  STL Technology

Weak diversification

The 3 months correlation between Advantech and STL is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Advantech Co and STL Technology Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on STL Technology 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 STL Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of STL Technology has no effect on the direction of Advantech i.e., Advantech and STL Technology go up and down completely randomly.

Pair Corralation between Advantech and STL Technology

Assuming the 90 days trading horizon Advantech is expected to generate 3.25 times less return on investment than STL Technology. But when comparing it to its historical volatility, Advantech Co is 2.06 times less risky than STL Technology. It trades about 0.1 of its potential returns per unit of risk. STL Technology Co is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  6,250  in STL Technology Co on December 24, 2024 and sell it today you would earn a total of  2,670  from holding STL Technology Co or generate 42.72% return on investment over 90 days.

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

Advantech Co  vs.  STL Technology Co

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.

STL Technology

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in STL Technology Co are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, STL Technology showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Advantech and STL Technology

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

The idea behind Advantech Co and STL Technology 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..