Correlation Between Advanced Ceramic and Arcadyan Technology

Can any of the company-specific risk be diversified away by investing in both Advanced Ceramic and Arcadyan 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 Advanced Ceramic and Arcadyan Technology 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 Arcadyan Technology Corp, you can compare the effects of market volatilities on Advanced Ceramic and Arcadyan 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 Advanced Ceramic with a short position of Arcadyan Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Advanced Ceramic and Arcadyan Technology.

Diversification Opportunities for Advanced Ceramic and Arcadyan Technology

-0.11

Correlation Coefficient

Advanced Ceramic  Arcadyan Technology

Good diversification

The 3 months correlation between Advanced and Arcadyan is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Advanced Ceramic X and Arcadyan Technology Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arcadyan Technology 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 Arcadyan Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arcadyan Technology Corp has no effect on the direction of Advanced Ceramic i.e., Advanced Ceramic and Arcadyan Technology go up and down completely randomly.

Pair Corralation between Advanced Ceramic and Arcadyan Technology

Assuming the 90 days trading horizon Advanced Ceramic X is expected to generate 1.17 times more return on investment than Arcadyan Technology. However, Advanced Ceramic is 1.17 times more volatile than Arcadyan Technology Corp. It trades about 0.13 of its potential returns per unit of risk. Arcadyan Technology Corp is currently generating about 0.02 per unit of risk. If you would invest  16,850  in Advanced Ceramic X on September 25, 2024 and sell it today you would earn a total of  1,150  from holding Advanced Ceramic X or generate 6.82% return on investment over 90 days.

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

Advanced Ceramic X  vs.  Arcadyan Technology 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.

Arcadyan Technology Corp

Risk-Adjusted Performance

10 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Arcadyan Technology Corp are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Arcadyan Technology showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Advanced Ceramic and Arcadyan Technology

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

The idea behind Advanced Ceramic X and Arcadyan Technology 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.