Correlation Between Advanced Info and Delta Electronics

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

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

Diversification Opportunities for Advanced Info and Delta Electronics

0.04

Correlation Coefficient

Advanced Info  Delta Electronics

Significant diversification

The 3 months correlation between Advanced and Delta is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Advanced Info Service and Delta Electronics Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Delta Electronics Public and Advanced Info 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 Info Service are associated (or correlated) with Delta Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Delta Electronics Public has no effect on the direction of Advanced Info i.e., Advanced Info and Delta Electronics go up and down completely randomly.

Pair Corralation between Advanced Info and Delta Electronics

Assuming the 90 days trading horizon Advanced Info Service is expected to generate 41.5 times more return on investment than Delta Electronics. However, Advanced Info is 41.5 times more volatile than Delta Electronics Public. It trades about 0.12 of its potential returns per unit of risk. Delta Electronics Public is currently generating about 0.2 per unit of risk. If you would invest  22,216  in Advanced Info Service on September 4, 2024 and sell it today you would earn a total of  6,684  from holding Advanced Info Service or generate 30.09% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	91.94%
Values	Daily Returns

Advanced Info Service  vs.  Delta Electronics Public

Advanced Info Service

Risk-Adjusted Performance

0 of 100

OK

Over the last 90 days Advanced Info Service has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat conflicting basic indicators, Advanced Info sustained solid returns over the last few months and may actually be approaching a breakup point.

Delta Electronics Public

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Delta Electronics Public are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat conflicting fundamental drivers, Delta Electronics sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Advanced Info and Delta Electronics

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

The idea behind Advanced Info Service and Delta 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.