Correlation Between AzureWave Technologies and Advanced Echem

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

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

Diversification Opportunities for AzureWave Technologies and Advanced Echem

-0.63

Correlation Coefficient

AzureWave Technologies  Advanced Echem

Excellent diversification

The 3 months correlation between AzureWave and Advanced is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding AzureWave Technologies and Advanced Echem Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Advanced Echem Materials and AzureWave Technologies 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 AzureWave Technologies are associated (or correlated) with Advanced Echem. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Advanced Echem Materials has no effect on the direction of AzureWave Technologies i.e., AzureWave Technologies and Advanced Echem go up and down completely randomly.

Pair Corralation between AzureWave Technologies and Advanced Echem

Assuming the 90 days trading horizon AzureWave Technologies is expected to generate 1.19 times less return on investment than Advanced Echem. In addition to that, AzureWave Technologies is 1.24 times more volatile than Advanced Echem Materials. It trades about 0.08 of its total potential returns per unit of risk. Advanced Echem Materials is currently generating about 0.12 per unit of volatility. If you would invest  19,773  in Advanced Echem Materials on October 27, 2024 and sell it today you would earn a total of  53,627  from holding Advanced Echem Materials or generate 271.21% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	99.79%
Values	Daily Returns

AzureWave Technologies  vs.  Advanced Echem Materials

AzureWave Technologies

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in AzureWave Technologies are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, AzureWave Technologies showed solid returns over the last few months and may actually be approaching a breakup point.

Advanced Echem Materials

Risk-Adjusted Performance

0 of 100

Very Weak

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

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

The idea behind AzureWave Technologies and Advanced Echem Materials 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.