Correlation Between Parade Technologies and Aspeed Technology

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

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

Diversification Opportunities for Parade Technologies and Aspeed Technology

0.57

Correlation Coefficient

Parade Technologies  Aspeed Technology

Very weak diversification

The 3 months correlation between Parade and Aspeed is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Parade Technologies and Aspeed Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aspeed Technology and Parade 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 Parade Technologies are associated (or correlated) with Aspeed Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aspeed Technology has no effect on the direction of Parade Technologies i.e., Parade Technologies and Aspeed Technology go up and down completely randomly.

Pair Corralation between Parade Technologies and Aspeed Technology

Assuming the 90 days trading horizon Parade Technologies is expected to generate 0.63 times more return on investment than Aspeed Technology. However, Parade Technologies is 1.59 times less risky than Aspeed Technology. It trades about 0.01 of its potential returns per unit of risk. Aspeed Technology is currently generating about -0.07 per unit of risk. If you would invest  75,000  in Parade Technologies on September 12, 2024 and sell it today you would lose (500.00) from holding Parade Technologies or give up 0.67% of portfolio value over 90 days.

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

Parade Technologies  vs.  Aspeed Technology

Parade Technologies

Risk-Adjusted Performance

0 of 100

Very Weak

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

Aspeed Technology

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Parade Technologies and Aspeed Technology

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

The idea behind Parade Technologies and Aspeed 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.