Correlation Between Promise Technology and Alchip Technologies

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

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

Diversification Opportunities for Promise Technology and Alchip Technologies

-0.81

Correlation Coefficient

Promise Technology  Alchip Technologies

Pay attention - limited upside

The 3 months correlation between Promise and Alchip is -0.81. Overlapping area represents the amount of risk that can be diversified away by holding Promise Technology and Alchip Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alchip Technologies and Promise Technology 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 Promise Technology are associated (or correlated) with Alchip Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alchip Technologies has no effect on the direction of Promise Technology i.e., Promise Technology and Alchip Technologies go up and down completely randomly.

Pair Corralation between Promise Technology and Alchip Technologies

Assuming the 90 days trading horizon Promise Technology is expected to generate 0.43 times more return on investment than Alchip Technologies. However, Promise Technology is 2.31 times less risky than Alchip Technologies. It trades about 0.05 of its potential returns per unit of risk. Alchip Technologies is currently generating about -0.21 per unit of risk. If you would invest  1,145  in Promise Technology on October 22, 2024 and sell it today you would earn a total of  15.00  from holding Promise Technology or generate 1.31% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	95.24%
Values	Daily Returns

Promise Technology  vs.  Alchip Technologies

Promise Technology

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Promise Technology 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.

Alchip Technologies

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Alchip Technologies are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Alchip Technologies showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Promise Technology and Alchip Technologies

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

The idea behind Promise Technology and Alchip Technologies 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.