Correlation Between Loctek Ergonomic and Advanced Micro

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

By analyzing existing cross correlation between Loctek Ergonomic Technology and Advanced Micro Fabrication, you can compare the effects of market volatilities on Loctek Ergonomic and Advanced Micro 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 Loctek Ergonomic with a short position of Advanced Micro. Check out your portfolio center. Please also check ongoing floating volatility patterns of Loctek Ergonomic and Advanced Micro.

Diversification Opportunities for Loctek Ergonomic and Advanced Micro

0.63

Correlation Coefficient

Loctek Ergonomic  Advanced Micro

Poor diversification

The 3 months correlation between Loctek and Advanced is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Loctek Ergonomic Technology and Advanced Micro Fabrication in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Advanced Micro Fabri and Loctek Ergonomic 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 Loctek Ergonomic Technology are associated (or correlated) with Advanced Micro. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Advanced Micro Fabri has no effect on the direction of Loctek Ergonomic i.e., Loctek Ergonomic and Advanced Micro go up and down completely randomly.

Pair Corralation between Loctek Ergonomic and Advanced Micro

Assuming the 90 days trading horizon Loctek Ergonomic Technology is expected to under-perform the Advanced Micro. But the stock apears to be less risky and, when comparing its historical volatility, Loctek Ergonomic Technology is 1.46 times less risky than Advanced Micro. The stock trades about -0.04 of its potential returns per unit of risk. The Advanced Micro Fabrication is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  17,325  in Advanced Micro Fabrication on October 13, 2024 and sell it today you would earn a total of  585.00  from holding Advanced Micro Fabrication or generate 3.38% return on investment over 90 days.

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

Loctek Ergonomic Technology  vs.  Advanced Micro Fabrication

Loctek Ergonomic Tec

Risk-Adjusted Performance

0 of 100

Very Weak

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

Advanced Micro Fabri

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Advanced Micro Fabrication are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Advanced Micro may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Loctek Ergonomic and Advanced Micro

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

The idea behind Loctek Ergonomic Technology and Advanced Micro Fabrication 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.