Correlation Between Advanced Energy and Feng Ching

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

By analyzing existing cross correlation between Advanced Energy Solution and Feng Ching Metal, you can compare the effects of market volatilities on Advanced Energy and Feng Ching 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 Advanced Energy with a short position of Feng Ching. Check out your portfolio center. Please also check ongoing floating volatility patterns of Advanced Energy and Feng Ching.

Diversification Opportunities for Advanced Energy and Feng Ching

-0.75

Correlation Coefficient

Advanced Energy  Feng Ching

Pay attention - limited upside

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

Pair Corralation between Advanced Energy and Feng Ching

Assuming the 90 days trading horizon Advanced Energy Solution is expected to generate 2.23 times more return on investment than Feng Ching. However, Advanced Energy is 2.23 times more volatile than Feng Ching Metal. It trades about 0.3 of its potential returns per unit of risk. Feng Ching Metal is currently generating about -0.21 per unit of risk. If you would invest  52,800  in Advanced Energy Solution on October 20, 2024 and sell it today you would earn a total of  58,700  from holding Advanced Energy Solution or generate 111.17% return on investment over 90 days.

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

Advanced Energy Solution  vs.  Feng Ching Metal

Advanced Energy Solution

Risk-Adjusted Performance

23 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Advanced Energy Solution are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Advanced Energy showed solid returns over the last few months and may actually be approaching a breakup point.

Feng Ching Metal

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Feng Ching Metal 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 February 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Advanced Energy and Feng Ching

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

The idea behind Advanced Energy Solution and Feng Ching Metal 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.