Correlation Between Advantech and Neo Neon

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

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

Diversification Opportunities for Advantech and Neo Neon

-0.45

Correlation Coefficient

Advantech  Neo Neon

Very good diversification

The 3 months correlation between Advantech and Neo is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Advantech Co and Neo Neon Holdings Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Neo Neon Holdings 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 Neo Neon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Neo Neon Holdings has no effect on the direction of Advantech i.e., Advantech and Neo Neon go up and down completely randomly.

Pair Corralation between Advantech and Neo Neon

Assuming the 90 days trading horizon Advantech Co is expected to generate 0.65 times more return on investment than Neo Neon. However, Advantech Co is 1.54 times less risky than Neo Neon. It trades about -0.01 of its potential returns per unit of risk. Neo Neon Holdings Limited is currently generating about -0.07 per unit of risk. If you would invest  36,800  in Advantech Co on September 29, 2024 and sell it today you would lose (1,700) from holding Advantech Co or give up 4.62% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	99.22%
Values	Daily Returns

Advantech Co  vs.  Neo Neon Holdings Limited

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.

Neo Neon Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Neo Neon Holdings Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Neo Neon is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Advantech and Neo Neon

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

The idea behind Advantech Co and Neo Neon Holdings Limited 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.