Correlation Between Sun Max and Alchip Technologies

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

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

Diversification Opportunities for Sun Max and Alchip Technologies

0.35

Correlation Coefficient

Sun Max  Alchip Technologies

Weak diversification

The 3 months correlation between Sun and Alchip is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Sun Max Tech and Alchip Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alchip Technologies and Sun Max 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 Sun Max Tech are associated (or correlated) with Alchip Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alchip Technologies has no effect on the direction of Sun Max i.e., Sun Max and Alchip Technologies go up and down completely randomly.

Pair Corralation between Sun Max and Alchip Technologies

Assuming the 90 days trading horizon Sun Max is expected to generate 21.12 times less return on investment than Alchip Technologies. But when comparing it to its historical volatility, Sun Max Tech is 1.76 times less risky than Alchip Technologies. It trades about 0.01 of its potential returns per unit of risk. Alchip Technologies is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  234,500  in Alchip Technologies on December 4, 2024 and sell it today you would earn a total of  68,000  from holding Alchip Technologies or generate 29.0% return on investment over 90 days.

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

Sun Max Tech  vs.  Alchip Technologies

Sun Max Tech

Risk-Adjusted Performance

Very Weak

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

Alchip Technologies

Risk-Adjusted Performance

OK

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

Pair Trading with Sun Max and Alchip Technologies

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

The idea behind Sun Max Tech and Alchip Technologies 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .