Correlation Between Advanced Braking and Technology One

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

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

Diversification Opportunities for Advanced Braking and Technology One

0.67

Correlation Coefficient

Advanced Braking  Technology One

Poor diversification

The 3 months correlation between Advanced and Technology is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Advanced Braking Technology and Technology One in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Technology One and Advanced Braking 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 Advanced Braking Technology are associated (or correlated) with Technology One. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Technology One has no effect on the direction of Advanced Braking i.e., Advanced Braking and Technology One go up and down completely randomly.

Pair Corralation between Advanced Braking and Technology One

Assuming the 90 days trading horizon Advanced Braking Technology is expected to under-perform the Technology One. In addition to that, Advanced Braking is 1.42 times more volatile than Technology One. It trades about -0.02 of its total potential returns per unit of risk. Technology One is currently generating about 0.28 per unit of volatility. If you would invest  2,448  in Technology One on October 6, 2024 and sell it today you would earn a total of  618.00  from holding Technology One or generate 25.25% return on investment over 90 days.

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

Advanced Braking Technology  vs.  Technology One

Advanced Braking Tec

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Advanced Braking Technology are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Advanced Braking may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Technology One

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Technology One are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain technical and fundamental indicators, Technology One unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Advanced Braking and Technology One

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

The idea behind Advanced Braking Technology and Technology One 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.