Correlation Between AV Tech and Cal Comp

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

By analyzing existing cross correlation between AV Tech Corp and Cal Comp Electronics Public, you can compare the effects of market volatilities on AV Tech and Cal Comp 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 AV Tech with a short position of Cal Comp. Check out your portfolio center. Please also check ongoing floating volatility patterns of AV Tech and Cal Comp.

Diversification Opportunities for AV Tech and Cal Comp

-0.54

Correlation Coefficient

AV Tech  Cal Comp

Excellent diversification

The 3 months correlation between 8072 and Cal is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding AV Tech Corp and Cal Comp Electronics Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cal Comp Electronics and AV Tech 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 AV Tech Corp are associated (or correlated) with Cal Comp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cal Comp Electronics has no effect on the direction of AV Tech i.e., AV Tech and Cal Comp go up and down completely randomly.

Pair Corralation between AV Tech and Cal Comp

Assuming the 90 days trading horizon AV Tech Corp is expected to generate 0.37 times more return on investment than Cal Comp. However, AV Tech Corp is 2.72 times less risky than Cal Comp. It trades about 0.0 of its potential returns per unit of risk. Cal Comp Electronics Public is currently generating about -0.04 per unit of risk. If you would invest  2,550  in AV Tech Corp on December 3, 2024 and sell it today you would lose (15.00) from holding AV Tech Corp or give up 0.59% of portfolio value over 90 days.

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

AV Tech Corp  vs.  Cal Comp Electronics Public

AV Tech Corp

Risk-Adjusted Performance

Very Weak

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

Cal Comp Electronics

Risk-Adjusted Performance

Very Weak

Over the last 90 days Cal Comp Electronics Public has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Pair Trading with AV Tech and Cal Comp

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

The idea behind AV Tech Corp and Cal Comp Electronics Public 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.