Correlation Between Answer Technology and Promate Electronic

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

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

Diversification Opportunities for Answer Technology and Promate Electronic

-0.72

Correlation Coefficient

Answer Technology  Promate Electronic

Pay attention - limited upside

The 3 months correlation between Answer and Promate is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding Answer Technology Co and Promate Electronic Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Promate Electronic and Answer Technology 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 Answer Technology Co are associated (or correlated) with Promate Electronic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Promate Electronic has no effect on the direction of Answer Technology i.e., Answer Technology and Promate Electronic go up and down completely randomly.

Pair Corralation between Answer Technology and Promate Electronic

Assuming the 90 days trading horizon Answer Technology Co is expected to generate 2.54 times more return on investment than Promate Electronic. However, Answer Technology is 2.54 times more volatile than Promate Electronic Co. It trades about 0.24 of its potential returns per unit of risk. Promate Electronic Co is currently generating about -0.17 per unit of risk. If you would invest  5,080  in Answer Technology Co on December 30, 2024 and sell it today you would earn a total of  2,400  from holding Answer Technology Co or generate 47.24% return on investment over 90 days.

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

Answer Technology Co  vs.  Promate Electronic Co

Answer Technology

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Answer Technology Co are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Answer Technology showed solid returns over the last few months and may actually be approaching a breakup point.

Promate Electronic

Risk-Adjusted Performance

Very Weak

Over the last 90 days Promate Electronic Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in April 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Answer Technology and Promate Electronic

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

The idea behind Answer Technology Co and Promate Electronic 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.

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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.