Correlation Between Posiflex Technology and ABC Taiwan

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

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

Diversification Opportunities for Posiflex Technology and ABC Taiwan

-0.21

Correlation Coefficient

Posiflex Technology  ABC Taiwan

Very good diversification

The 3 months correlation between Posiflex and ABC is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding Posiflex Technology and ABC Taiwan Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ABC Taiwan Electronics and Posiflex 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 Posiflex Technology are associated (or correlated) with ABC Taiwan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ABC Taiwan Electronics has no effect on the direction of Posiflex Technology i.e., Posiflex Technology and ABC Taiwan go up and down completely randomly.

Pair Corralation between Posiflex Technology and ABC Taiwan

Assuming the 90 days trading horizon Posiflex Technology is expected to generate 1.63 times more return on investment than ABC Taiwan. However, Posiflex Technology is 1.63 times more volatile than ABC Taiwan Electronics. It trades about 0.13 of its potential returns per unit of risk. ABC Taiwan Electronics is currently generating about -0.19 per unit of risk. If you would invest  33,650  in Posiflex Technology on October 12, 2024 and sell it today you would earn a total of  1,950  from holding Posiflex Technology or generate 5.79% return on investment over 90 days.

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

Posiflex Technology  vs.  ABC Taiwan Electronics

Posiflex Technology

Risk-Adjusted Performance

24 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Posiflex Technology are ranked lower than 24 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Posiflex Technology showed solid returns over the last few months and may actually be approaching a breakup point.

ABC Taiwan Electronics

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Posiflex Technology and ABC Taiwan

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

The idea behind Posiflex Technology and ABC Taiwan Electronics 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..