Correlation Between Advanced Echem and Adata Technology

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

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

Diversification Opportunities for Advanced Echem and Adata Technology

0.38

Correlation Coefficient

Advanced Echem  Adata Technology

Weak diversification

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

Pair Corralation between Advanced Echem and Adata Technology

Assuming the 90 days trading horizon Advanced Echem Materials is expected to generate 1.01 times more return on investment than Adata Technology. However, Advanced Echem is 1.01 times more volatile than Adata Technology Co. It trades about -0.22 of its potential returns per unit of risk. Adata Technology Co is currently generating about -0.37 per unit of risk. If you would invest  71,000  in Advanced Echem Materials on October 5, 2024 and sell it today you would lose (5,100) from holding Advanced Echem Materials or give up 7.18% of portfolio value over 90 days.

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

Advanced Echem Materials  vs.  Adata Technology Co

Advanced Echem Materials

Risk-Adjusted Performance

0 of 100

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.

Adata Technology

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Adata Technology 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 February 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Advanced Echem and Adata Technology

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

The idea behind Advanced Echem Materials and Adata Technology 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.