Correlation Between Advtech and Rex Trueform

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

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

Diversification Opportunities for Advtech and Rex Trueform

-0.28

Correlation Coefficient

Advtech  Rex Trueform

Very good diversification

The 3 months correlation between Advtech and Rex is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Advtech and Rex Trueform Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rex Trueform Group and Advtech 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 Advtech are associated (or correlated) with Rex Trueform. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rex Trueform Group has no effect on the direction of Advtech i.e., Advtech and Rex Trueform go up and down completely randomly.

Pair Corralation between Advtech and Rex Trueform

Assuming the 90 days trading horizon Advtech is expected to under-perform the Rex Trueform. But the stock apears to be less risky and, when comparing its historical volatility, Advtech is 3.5 times less risky than Rex Trueform. The stock trades about -0.02 of its potential returns per unit of risk. The Rex Trueform Group is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  117,200  in Rex Trueform Group on December 27, 2024 and sell it today you would earn a total of  16,900  from holding Rex Trueform Group or generate 14.42% return on investment over 90 days.

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

Advtech  vs.  Rex Trueform Group

Advtech

Risk-Adjusted Performance

Very Weak

Over the last 90 days Advtech has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Advtech is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Rex Trueform Group

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Rex Trueform Group are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Rex Trueform exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Advtech and Rex Trueform

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

The idea behind Advtech and Rex Trueform Group 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.