Correlation Between Connection Technology and ADLINK Technology

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

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

Diversification Opportunities for Connection Technology and ADLINK Technology

0.38

Correlation Coefficient

Connection Technology  ADLINK Technology

Weak diversification

The 3 months correlation between Connection and ADLINK is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Connection Technology Systems and ADLINK Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ADLINK Technology and Connection 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 Connection Technology Systems are associated (or correlated) with ADLINK Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ADLINK Technology has no effect on the direction of Connection Technology i.e., Connection Technology and ADLINK Technology go up and down completely randomly.

Pair Corralation between Connection Technology and ADLINK Technology

Assuming the 90 days trading horizon Connection Technology is expected to generate 41.57 times less return on investment than ADLINK Technology. But when comparing it to its historical volatility, Connection Technology Systems is 1.81 times less risky than ADLINK Technology. It trades about 0.0 of its potential returns per unit of risk. ADLINK Technology is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  7,960  in ADLINK Technology on December 25, 2024 and sell it today you would earn a total of  700.00  from holding ADLINK Technology or generate 8.79% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.21%
Values	Daily Returns

Connection Technology Systems  vs.  ADLINK Technology

Connection Technology

Risk-Adjusted Performance

Very Weak

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

ADLINK Technology

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in ADLINK Technology are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, ADLINK Technology may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Connection Technology and ADLINK Technology

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

The idea behind Connection Technology Systems and ADLINK Technology 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.