Correlation Between Materials Analysis and Great Computer

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

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

Diversification Opportunities for Materials Analysis and Great Computer

-0.64

Correlation Coefficient

Materials Analysis  Great Computer

Excellent diversification

The 3 months correlation between Materials and Great is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding Materials Analysis Technology and Great Computer in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Great Computer and Materials Analysis 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 Materials Analysis Technology are associated (or correlated) with Great Computer. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Great Computer has no effect on the direction of Materials Analysis i.e., Materials Analysis and Great Computer go up and down completely randomly.

Pair Corralation between Materials Analysis and Great Computer

Assuming the 90 days trading horizon Materials Analysis Technology is expected to generate 0.27 times more return on investment than Great Computer. However, Materials Analysis Technology is 3.67 times less risky than Great Computer. It trades about -0.15 of its potential returns per unit of risk. Great Computer is currently generating about -0.06 per unit of risk. If you would invest  25,950  in Materials Analysis Technology on September 16, 2024 and sell it today you would lose (1,250) from holding Materials Analysis Technology or give up 4.82% of portfolio value over 90 days.

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

Materials Analysis Technology  vs.  Great Computer

Materials Analysis

Risk-Adjusted Performance

0 of 100

Very Weak

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

Great Computer

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Great Computer are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Great Computer showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Materials Analysis and Great Computer

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

The idea behind Materials Analysis Technology and Great Computer 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.

Check out your portfolio center.

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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.