Correlation Between Advanced Echem and AVer Information

Can any of the company-specific risk be diversified away by investing in both Advanced Echem and AVer Information 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 AVer Information 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 AVer Information, you can compare the effects of market volatilities on Advanced Echem and AVer Information 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 AVer Information. Check out your portfolio center. Please also check ongoing floating volatility patterns of Advanced Echem and AVer Information.

Diversification Opportunities for Advanced Echem and AVer Information

-0.21

Correlation Coefficient

Advanced Echem  AVer Information

Very good diversification

The 3 months correlation between Advanced and AVer is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding Advanced Echem Materials and AVer Information in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AVer Information 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 AVer Information. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AVer Information has no effect on the direction of Advanced Echem i.e., Advanced Echem and AVer Information go up and down completely randomly.

Pair Corralation between Advanced Echem and AVer Information

Assuming the 90 days trading horizon Advanced Echem Materials is expected to generate 1.06 times more return on investment than AVer Information. However, Advanced Echem is 1.06 times more volatile than AVer Information. It trades about 0.12 of its potential returns per unit of risk. AVer Information is currently generating about 0.01 per unit of risk. If you would invest  17,904  in Advanced Echem Materials on October 5, 2024 and sell it today you would earn a total of  47,996  from holding Advanced Echem Materials or generate 268.07% return on investment over 90 days.

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

Advanced Echem Materials  vs.  AVer Information

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.

AVer Information

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AVer Information has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Pair Trading with Advanced Echem and AVer Information

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

The idea behind Advanced Echem Materials and AVer Information 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.