Correlation Between ADLINK Technology and Advantech

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

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

Diversification Opportunities for ADLINK Technology and Advantech

0.91

Correlation Coefficient

ADLINK Technology  Advantech

Almost no diversification

The 3 months correlation between ADLINK and Advantech is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding ADLINK Technology and Advantech Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Advantech and ADLINK 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 ADLINK Technology are associated (or correlated) with Advantech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Advantech has no effect on the direction of ADLINK Technology i.e., ADLINK Technology and Advantech go up and down completely randomly.

Pair Corralation between ADLINK Technology and Advantech

Assuming the 90 days trading horizon ADLINK Technology is expected to generate 1.25 times less return on investment than Advantech. In addition to that, ADLINK Technology is 1.11 times more volatile than Advantech Co. It trades about 0.15 of its total potential returns per unit of risk. Advantech Co is currently generating about 0.21 per unit of volatility. If you would invest  34,400  in Advantech Co on December 2, 2024 and sell it today you would earn a total of  6,200  from holding Advantech Co or generate 18.02% return on investment over 90 days.

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

ADLINK Technology  vs.  Advantech Co

ADLINK Technology

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ADLINK Technology are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, ADLINK Technology showed solid returns over the last few months and may actually be approaching a breakup point.

Advantech

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Advantech Co are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Advantech showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ADLINK Technology and Advantech

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

The idea behind ADLINK Technology and Advantech Co 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.