Correlation Between ADLINK Technology and AAEON Technology

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

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

Diversification Opportunities for ADLINK Technology and AAEON Technology

-0.6

Correlation Coefficient

ADLINK Technology  AAEON Technology

Excellent diversification

The 3 months correlation between ADLINK and AAEON is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding ADLINK Technology and AAEON Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AAEON Technology 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 AAEON Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AAEON Technology has no effect on the direction of ADLINK Technology i.e., ADLINK Technology and AAEON Technology go up and down completely randomly.

Pair Corralation between ADLINK Technology and AAEON Technology

Assuming the 90 days trading horizon ADLINK Technology is expected to generate 0.92 times more return on investment than AAEON Technology. However, ADLINK Technology is 1.08 times less risky than AAEON Technology. It trades about 0.07 of its potential returns per unit of risk. AAEON Technology is currently generating about -0.13 per unit of risk. If you would invest  6,890  in ADLINK Technology on September 16, 2024 and sell it today you would earn a total of  510.00  from holding ADLINK Technology or generate 7.4% return on investment over 90 days.

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

ADLINK Technology  vs.  AAEON Technology

ADLINK Technology

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in ADLINK Technology are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, ADLINK Technology may actually be approaching a critical reversion point that can send shares even higher in January 2025.

AAEON Technology

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AAEON 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 ADLINK Technology and AAEON Technology

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

The idea behind ADLINK Technology and AAEON 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.

Check out your portfolio center.

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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.