Correlation Between Castles Technology and AVerMedia Technologies

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

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

Diversification Opportunities for Castles Technology and AVerMedia Technologies

0.07

Correlation Coefficient

Castles Technology  AVerMedia Technologies

Significant diversification

The 3 months correlation between Castles and AVerMedia is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Castles Technology Co and AVerMedia Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AVerMedia Technologies and Castles 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 Castles Technology Co are associated (or correlated) with AVerMedia Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AVerMedia Technologies has no effect on the direction of Castles Technology i.e., Castles Technology and AVerMedia Technologies go up and down completely randomly.

Pair Corralation between Castles Technology and AVerMedia Technologies

Assuming the 90 days trading horizon Castles Technology is expected to generate 46.29 times less return on investment than AVerMedia Technologies. But when comparing it to its historical volatility, Castles Technology Co is 1.37 times less risky than AVerMedia Technologies. It trades about 0.0 of its potential returns per unit of risk. AVerMedia Technologies is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  2,115  in AVerMedia Technologies on September 28, 2024 and sell it today you would earn a total of  2,650  from holding AVerMedia Technologies or generate 125.3% return on investment over 90 days.

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

Castles Technology Co  vs.  AVerMedia Technologies

Castles Technology

Risk-Adjusted Performance

0 of 100

Very Weak

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

AVerMedia Technologies

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in AVerMedia Technologies are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, AVerMedia Technologies may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Castles Technology and AVerMedia Technologies

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

The idea behind Castles Technology Co and AVerMedia Technologies 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..