Correlation Between Advanced Ceramic and HTC Corp

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

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

Diversification Opportunities for Advanced Ceramic and HTC Corp

0.06

Correlation Coefficient

Advanced Ceramic  HTC Corp

Significant diversification

The 3 months correlation between Advanced and HTC is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Advanced Ceramic X and HTC Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HTC Corp and Advanced Ceramic 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 Advanced Ceramic X are associated (or correlated) with HTC Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HTC Corp has no effect on the direction of Advanced Ceramic i.e., Advanced Ceramic and HTC Corp go up and down completely randomly.

Pair Corralation between Advanced Ceramic and HTC Corp

Assuming the 90 days trading horizon Advanced Ceramic X is expected to under-perform the HTC Corp. But the stock apears to be less risky and, when comparing its historical volatility, Advanced Ceramic X is 1.03 times less risky than HTC Corp. The stock trades about -0.01 of its potential returns per unit of risk. The HTC Corp is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  4,400  in HTC Corp on September 25, 2024 and sell it today you would lose (35.00) from holding HTC Corp or give up 0.8% of portfolio value over 90 days.

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

Advanced Ceramic X  vs.  HTC Corp

Advanced Ceramic X

Risk-Adjusted Performance

0 of 100

Very Weak

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

HTC Corp

Risk-Adjusted Performance

0 of 100

Very Weak

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

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

The idea behind Advanced Ceramic X and HTC 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.