Correlation Between IBASE Technology and Axiomtek

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

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

Diversification Opportunities for IBASE Technology and Axiomtek

-0.47

Correlation Coefficient

IBASE Technology  Axiomtek

Very good diversification

The 3 months correlation between IBASE and Axiomtek is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding IBASE Technology and Axiomtek Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Axiomtek and IBASE 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 IBASE Technology are associated (or correlated) with Axiomtek. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Axiomtek has no effect on the direction of IBASE Technology i.e., IBASE Technology and Axiomtek go up and down completely randomly.

Pair Corralation between IBASE Technology and Axiomtek

Assuming the 90 days trading horizon IBASE Technology is expected to under-perform the Axiomtek. But the stock apears to be less risky and, when comparing its historical volatility, IBASE Technology is 2.5 times less risky than Axiomtek. The stock trades about -0.06 of its potential returns per unit of risk. The Axiomtek Co is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  10,150  in Axiomtek Co on October 7, 2024 and sell it today you would earn a total of  1,050  from holding Axiomtek Co or generate 10.34% return on investment over 90 days.

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

IBASE Technology  vs.  Axiomtek Co

IBASE Technology

Risk-Adjusted Performance

0 of 100

Very Weak

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

Axiomtek

Risk-Adjusted Performance

10 of 100

OK

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

Pair Trading with IBASE Technology and Axiomtek

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

The idea behind IBASE Technology and Axiomtek Co 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.