Correlation Between Aehr Test and Photronics

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

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

Diversification Opportunities for Aehr Test and Photronics

0.84

Correlation Coefficient

Aehr Test  Photronics

Very poor diversification

The 3 months correlation between Aehr and Photronics is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Aehr Test Systems and Photronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Photronics and Aehr Test 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 Aehr Test Systems are associated (or correlated) with Photronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Photronics has no effect on the direction of Aehr Test i.e., Aehr Test and Photronics go up and down completely randomly.

Pair Corralation between Aehr Test and Photronics

Given the investment horizon of 90 days Aehr Test Systems is expected to under-perform the Photronics. In addition to that, Aehr Test is 3.06 times more volatile than Photronics. It trades about -0.19 of its total potential returns per unit of risk. Photronics is currently generating about -0.11 per unit of volatility. If you would invest  2,352  in Photronics on December 29, 2024 and sell it today you would lose (292.00) from holding Photronics or give up 12.41% of portfolio value over 90 days.

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

Aehr Test Systems  vs.  Photronics

Aehr Test Systems

Risk-Adjusted Performance

Very Weak

Over the last 90 days Aehr Test Systems has generated negative risk-adjusted returns adding no value to investors with long positions. Even with weak performance in the last few months, the Stock's technical indicators remain relatively invariable which may send shares a bit higher in April 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Photronics

Risk-Adjusted Performance

Very Weak

Over the last 90 days Photronics has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Aehr Test and Photronics

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

The idea behind Aehr Test Systems and Photronics 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.