Correlation Between Altek Corp and Gemtek Technology

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

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

Diversification Opportunities for Altek Corp and Gemtek Technology

-0.17

Correlation Coefficient

Altek Corp  Gemtek Technology

Good diversification

The 3 months correlation between Altek and Gemtek is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Altek Corp and Gemtek Technology Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gemtek Technology and Altek Corp 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 Altek Corp are associated (or correlated) with Gemtek Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gemtek Technology has no effect on the direction of Altek Corp i.e., Altek Corp and Gemtek Technology go up and down completely randomly.

Pair Corralation between Altek Corp and Gemtek Technology

Assuming the 90 days trading horizon Altek Corp is expected to generate 2.6 times more return on investment than Gemtek Technology. However, Altek Corp is 2.6 times more volatile than Gemtek Technology Co. It trades about 0.12 of its potential returns per unit of risk. Gemtek Technology Co is currently generating about -0.06 per unit of risk. If you would invest  3,610  in Altek Corp on December 23, 2024 and sell it today you would earn a total of  785.00  from holding Altek Corp or generate 21.75% return on investment over 90 days.

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

Altek Corp  vs.  Gemtek Technology Co

Altek Corp

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Altek Corp are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Altek Corp showed solid returns over the last few months and may actually be approaching a breakup point.

Gemtek Technology

Risk-Adjusted Performance

Very Weak

Over the last 90 days Gemtek Technology Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Gemtek Technology 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 Altek Corp and Gemtek Technology

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

The idea behind Altek Corp and Gemtek Technology 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.

Check out your portfolio center.

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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.