Correlation Between Advanced Energy and Chardan NexTech

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

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

Diversification Opportunities for Advanced Energy and Chardan NexTech

0.05

Correlation Coefficient

Advanced Energy  Chardan NexTech

Significant diversification

The 3 months correlation between Advanced and Chardan is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Advanced Energy Industries and Chardan NexTech Acquisition in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chardan NexTech Acqu and Advanced Energy 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 Energy Industries are associated (or correlated) with Chardan NexTech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chardan NexTech Acqu has no effect on the direction of Advanced Energy i.e., Advanced Energy and Chardan NexTech go up and down completely randomly.

Pair Corralation between Advanced Energy and Chardan NexTech

Given the investment horizon of 90 days Advanced Energy is expected to generate 94.68 times less return on investment than Chardan NexTech. But when comparing it to its historical volatility, Advanced Energy Industries is 39.32 times less risky than Chardan NexTech. It trades about 0.03 of its potential returns per unit of risk. Chardan NexTech Acquisition is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  39.00  in Chardan NexTech Acquisition on October 23, 2024 and sell it today you would lose (35.40) from holding Chardan NexTech Acquisition or give up 90.77% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	88.48%
Values	Daily Returns

Advanced Energy Industries  vs.  Chardan NexTech Acquisition

Advanced Energy Indu

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Advanced Energy Industries are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively inconsistent forward indicators, Advanced Energy unveiled solid returns over the last few months and may actually be approaching a breakup point.

Chardan NexTech Acqu

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Chardan NexTech Acquisition are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly inconsistent forward indicators, Chardan NexTech showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Advanced Energy and Chardan NexTech

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

The idea behind Advanced Energy Industries and Chardan NexTech Acquisition 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.