Correlation Between APT Medical and Advanced Technology

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

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

Diversification Opportunities for APT Medical and Advanced Technology

0.48

Correlation Coefficient

APT Medical  Advanced Technology

Very weak diversification

The 3 months correlation between APT and Advanced is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding APT Medical and Advanced Technology Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Advanced Technology and APT Medical 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 APT Medical are associated (or correlated) with Advanced Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Advanced Technology has no effect on the direction of APT Medical i.e., APT Medical and Advanced Technology go up and down completely randomly.

Pair Corralation between APT Medical and Advanced Technology

Assuming the 90 days trading horizon APT Medical is expected to generate 4.17 times less return on investment than Advanced Technology. But when comparing it to its historical volatility, APT Medical is 1.32 times less risky than Advanced Technology. It trades about 0.03 of its potential returns per unit of risk. Advanced Technology Materials is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  1,144  in Advanced Technology Materials on December 24, 2024 and sell it today you would earn a total of  134.00  from holding Advanced Technology Materials or generate 11.71% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.31%
Values	Daily Returns

APT Medical  vs.  Advanced Technology Materials

APT Medical

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in APT Medical are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, APT Medical is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Advanced Technology

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Advanced Technology Materials are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Advanced Technology sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with APT Medical and Advanced Technology

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

The idea behind APT Medical and Advanced Technology Materials 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.