Correlation Between Level Biotechnology and Alchip Technologies

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

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

Diversification Opportunities for Level Biotechnology and Alchip Technologies

-0.4

Correlation Coefficient

Level Biotechnology  Alchip Technologies

Very good diversification

The 3 months correlation between Level and Alchip is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Level Biotechnology and Alchip Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alchip Technologies and Level Biotechnology 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 Level Biotechnology 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 Level Biotechnology i.e., Level Biotechnology and Alchip Technologies go up and down completely randomly.

Pair Corralation between Level Biotechnology and Alchip Technologies

Assuming the 90 days trading horizon Level Biotechnology is expected to generate 34.49 times less return on investment than Alchip Technologies. But when comparing it to its historical volatility, Level Biotechnology is 7.22 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 0.23 of returns per unit of risk over similar time horizon. If you would invest  256,000  in Alchip Technologies on October 7, 2024 and sell it today you would earn a total of  43,500  from holding Alchip Technologies or generate 16.99% return on investment over 90 days.

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

Level Biotechnology  vs.  Alchip Technologies

Level Biotechnology

Risk-Adjusted Performance

0 of 100

Very Weak

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

Alchip Technologies

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Alchip Technologies are ranked lower than 17 (%) 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 Level Biotechnology and Alchip Technologies

The main advantage of trading using opposite Level Biotechnology and Alchip Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Level Biotechnology 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 Level Biotechnology 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.