Correlation Between Aspeed Technology and Sensortek Technology

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

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

Diversification Opportunities for Aspeed Technology and Sensortek Technology

0.55

Correlation Coefficient

Aspeed Technology  Sensortek Technology

Very weak diversification

The 3 months correlation between Aspeed and Sensortek is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Aspeed Technology and Sensortek Technology Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sensortek Technology Corp and Aspeed 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 Aspeed Technology are associated (or correlated) with Sensortek Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sensortek Technology Corp has no effect on the direction of Aspeed Technology i.e., Aspeed Technology and Sensortek Technology go up and down completely randomly.

Pair Corralation between Aspeed Technology and Sensortek Technology

Assuming the 90 days trading horizon Aspeed Technology is expected to generate 2.04 times more return on investment than Sensortek Technology. However, Aspeed Technology is 2.04 times more volatile than Sensortek Technology Corp. It trades about -0.03 of its potential returns per unit of risk. Sensortek Technology Corp is currently generating about -0.08 per unit of risk. If you would invest  364,000  in Aspeed Technology on December 24, 2024 and sell it today you would lose (29,000) from holding Aspeed Technology or give up 7.97% of portfolio value over 90 days.

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

Aspeed Technology  vs.  Sensortek Technology Corp

Aspeed Technology

Risk-Adjusted Performance

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 fairly stable basic indicators, Aspeed Technology is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Sensortek Technology Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Sensortek Technology Corp 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 Aspeed Technology and Sensortek Technology

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

The idea behind Aspeed Technology and Sensortek Technology Corp 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.