Correlation Between Altek Corp and BenQ Materials

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

By analyzing existing cross correlation between Altek Corp and BenQ Materials Corp, you can compare the effects of market volatilities on Altek Corp and BenQ Materials 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 BenQ Materials. Check out your portfolio center. Please also check ongoing floating volatility patterns of Altek Corp and BenQ Materials.

Diversification Opportunities for Altek Corp and BenQ Materials

-0.32

Correlation Coefficient

Altek Corp  BenQ Materials

Very good diversification

The 3 months correlation between Altek and BenQ is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Altek Corp and BenQ Materials Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BenQ Materials Corp 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 BenQ Materials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BenQ Materials Corp has no effect on the direction of Altek Corp i.e., Altek Corp and BenQ Materials go up and down completely randomly.

Pair Corralation between Altek Corp and BenQ Materials

Assuming the 90 days trading horizon Altek Corp is expected to generate 1.25 times more return on investment than BenQ Materials. However, Altek Corp is 1.25 times more volatile than BenQ Materials Corp. It trades about -0.05 of its potential returns per unit of risk. BenQ Materials Corp is currently generating about -0.07 per unit of risk. If you would invest  3,470  in Altek Corp on September 23, 2024 and sell it today you would lose (185.00) from holding Altek Corp or give up 5.33% of portfolio value over 90 days.

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

Altek Corp  vs.  BenQ Materials Corp

Altek Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Altek Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Altek Corp is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

BenQ Materials Corp

Risk-Adjusted Performance

0 of 100

Very Weak

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

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

The idea behind Altek Corp and BenQ Materials Corp 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.