Correlation Between NEXCOM International and Advantech

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

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

Diversification Opportunities for NEXCOM International and Advantech

0.7

Correlation Coefficient

NEXCOM International  Advantech

Poor diversification

The 3 months correlation between NEXCOM and Advantech is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding NEXCOM International Co and Advantech Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Advantech and NEXCOM International 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 NEXCOM International Co are associated (or correlated) with Advantech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Advantech has no effect on the direction of NEXCOM International i.e., NEXCOM International and Advantech go up and down completely randomly.

Pair Corralation between NEXCOM International and Advantech

Assuming the 90 days trading horizon NEXCOM International Co is expected to generate 2.12 times more return on investment than Advantech. However, NEXCOM International is 2.12 times more volatile than Advantech Co. It trades about 0.19 of its potential returns per unit of risk. Advantech Co is currently generating about 0.11 per unit of risk. If you would invest  5,910  in NEXCOM International Co on December 24, 2024 and sell it today you would earn a total of  3,100  from holding NEXCOM International Co or generate 52.45% return on investment over 90 days.

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

NEXCOM International Co  vs.  Advantech Co

NEXCOM International

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in NEXCOM International Co are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, NEXCOM International showed solid returns over the last few months and may actually be approaching a breakup point.

Advantech

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Advantech Co are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Advantech showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with NEXCOM International and Advantech

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

The idea behind NEXCOM International Co and Advantech 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.

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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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.