Correlation Between Advantech and Ennoconn Corp

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

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

Diversification Opportunities for Advantech and Ennoconn Corp

0.79

Correlation Coefficient

Advantech  Ennoconn Corp

Poor diversification

The 3 months correlation between Advantech and Ennoconn is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Advantech Co and Ennoconn Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ennoconn 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 Ennoconn Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ennoconn Corp has no effect on the direction of Advantech i.e., Advantech and Ennoconn Corp go up and down completely randomly.

Pair Corralation between Advantech and Ennoconn Corp

Assuming the 90 days trading horizon Advantech Co is expected to generate 1.05 times more return on investment than Ennoconn Corp. However, Advantech is 1.05 times more volatile than Ennoconn Corp. It trades about 0.1 of its potential returns per unit of risk. Ennoconn Corp is currently generating about 0.01 per unit of risk. If you would invest  34,550  in Advantech Co on December 30, 2024 and sell it today you would earn a total of  4,250  from holding Advantech Co or generate 12.3% 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.  Ennoconn 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.

Ennoconn Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Ennoconn Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Ennoconn Corp is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Advantech and Ennoconn Corp

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

The idea behind Advantech Co and Ennoconn 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.