Correlation Between Advantech and AAEON Technology

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

Diversification Opportunities for Advantech and AAEON Technology

0.58

Correlation Coefficient

Advantech  AAEON Technology

Very weak diversification

The 3 months correlation between Advantech and AAEON is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Advantech Co and AAEON Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AAEON 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 AAEON Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AAEON Technology has no effect on the direction of Advantech i.e., Advantech and AAEON Technology go up and down completely randomly.

Pair Corralation between Advantech and AAEON Technology

Assuming the 90 days trading horizon Advantech Co is expected to generate 1.01 times more return on investment than AAEON Technology. However, Advantech is 1.01 times more volatile than AAEON Technology. It trades about 0.11 of its potential returns per unit of risk. AAEON Technology is currently generating about 0.09 per unit of risk. If you would invest  34,550  in Advantech Co on December 29, 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	Weak
Accuracy	98.25%
Values	Daily Returns

Advantech Co  vs.  AAEON Technology

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.

AAEON Technology

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in AAEON Technology are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, AAEON Technology showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Advantech and AAEON Technology

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

The idea behind Advantech Co and AAEON Technology 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.