Correlation Between AVerMedia Technologies and X Legend

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

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

Diversification Opportunities for AVerMedia Technologies and X Legend

0.7

Correlation Coefficient

AVerMedia Technologies  X Legend

Poor diversification

The 3 months correlation between AVerMedia and 4994 is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding AVerMedia Technologies and X Legend Entertainment Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on X Legend Entertainment and AVerMedia Technologies 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 AVerMedia Technologies are associated (or correlated) with X Legend. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of X Legend Entertainment has no effect on the direction of AVerMedia Technologies i.e., AVerMedia Technologies and X Legend go up and down completely randomly.

Pair Corralation between AVerMedia Technologies and X Legend

Assuming the 90 days trading horizon AVerMedia Technologies is expected to under-perform the X Legend. In addition to that, AVerMedia Technologies is 1.22 times more volatile than X Legend Entertainment Co. It trades about -0.06 of its total potential returns per unit of risk. X Legend Entertainment Co is currently generating about -0.05 per unit of volatility. If you would invest  11,200  in X Legend Entertainment Co on September 12, 2024 and sell it today you would lose (600.00) from holding X Legend Entertainment Co or give up 5.36% of portfolio value over 90 days.

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

AVerMedia Technologies  vs.  X Legend Entertainment Co

AVerMedia Technologies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AVerMedia Technologies 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.

X Legend Entertainment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days X Legend Entertainment Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, X Legend 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 AVerMedia Technologies and X Legend

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

The idea behind AVerMedia Technologies and X Legend Entertainment 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.