Correlation Between Advantech and Asia Electronic

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

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

Diversification Opportunities for Advantech and Asia Electronic

-0.61

Correlation Coefficient

Advantech  Asia Electronic

Excellent diversification

The 3 months correlation between Advantech and Asia is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding Advantech Co and Asia Electronic Material in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Asia Electronic Material 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 Asia Electronic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Asia Electronic Material has no effect on the direction of Advantech i.e., Advantech and Asia Electronic go up and down completely randomly.

Pair Corralation between Advantech and Asia Electronic

Assuming the 90 days trading horizon Advantech Co is expected to under-perform the Asia Electronic. But the stock apears to be less risky and, when comparing its historical volatility, Advantech Co is 1.28 times less risky than Asia Electronic. The stock trades about -0.01 of its potential returns per unit of risk. The Asia Electronic Material is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  2,130  in Asia Electronic Material on September 29, 2024 and sell it today you would lose (55.00) from holding Asia Electronic Material or give up 2.58% 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.  Asia Electronic Material

Advantech

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Advantech Co are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Advantech may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Asia Electronic Material

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Asia Electronic Material has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Pair Trading with Advantech and Asia Electronic

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

The idea behind Advantech Co and Asia Electronic Material 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.