Correlation Between Cipherlab and Quanta Storage

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

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

Diversification Opportunities for Cipherlab and Quanta Storage

-0.17

Correlation Coefficient

Cipherlab  Quanta Storage

Good diversification

The 3 months correlation between Cipherlab and Quanta is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Cipherlab Co and Quanta Storage in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Quanta Storage and Cipherlab 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 Cipherlab Co are associated (or correlated) with Quanta Storage. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Quanta Storage has no effect on the direction of Cipherlab i.e., Cipherlab and Quanta Storage go up and down completely randomly.

Pair Corralation between Cipherlab and Quanta Storage

Assuming the 90 days trading horizon Cipherlab is expected to generate 1.46 times less return on investment than Quanta Storage. But when comparing it to its historical volatility, Cipherlab Co is 2.08 times less risky than Quanta Storage. It trades about 0.18 of its potential returns per unit of risk. Quanta Storage is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  9,770  in Quanta Storage on October 15, 2024 and sell it today you would earn a total of  830.00  from holding Quanta Storage or generate 8.5% return on investment over 90 days.

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

Cipherlab Co  vs.  Quanta Storage

Cipherlab

Risk-Adjusted Performance

0 of 100

Very Weak

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

Quanta Storage

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Quanta Storage are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Quanta Storage may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Cipherlab and Quanta Storage

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

The idea behind Cipherlab Co and Quanta Storage 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.