Correlation Between Amazing Microelectronic and Polytronics Technology

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

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

Diversification Opportunities for Amazing Microelectronic and Polytronics Technology

0.75

Correlation Coefficient

Amazing Microelectronic  Polytronics Technology

Poor diversification

The 3 months correlation between Amazing and Polytronics is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Amazing Microelectronic and Polytronics Technology Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Polytronics Technology and Amazing Microelectronic 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 Amazing Microelectronic are associated (or correlated) with Polytronics Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Polytronics Technology has no effect on the direction of Amazing Microelectronic i.e., Amazing Microelectronic and Polytronics Technology go up and down completely randomly.

Pair Corralation between Amazing Microelectronic and Polytronics Technology

Assuming the 90 days trading horizon Amazing Microelectronic is expected to generate 0.55 times more return on investment than Polytronics Technology. However, Amazing Microelectronic is 1.8 times less risky than Polytronics Technology. It trades about -0.02 of its potential returns per unit of risk. Polytronics Technology Corp is currently generating about -0.03 per unit of risk. If you would invest  9,340  in Amazing Microelectronic on September 15, 2024 and sell it today you would lose (290.00) from holding Amazing Microelectronic or give up 3.1% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.44%
Values	Daily Returns

Amazing Microelectronic  vs.  Polytronics Technology Corp

Amazing Microelectronic

Risk-Adjusted Performance

0 of 100

Very Weak

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

Polytronics Technology

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Amazing Microelectronic and Polytronics Technology

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

The idea behind Amazing Microelectronic and Polytronics 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.