Correlation Between Arteris and NeoMagic

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

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

Diversification Opportunities for Arteris and NeoMagic

-0.7

Correlation Coefficient

Arteris  NeoMagic

Excellent diversification

The 3 months correlation between Arteris and NeoMagic is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding Arteris and NeoMagic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NeoMagic and Arteris 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 Arteris are associated (or correlated) with NeoMagic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NeoMagic has no effect on the direction of Arteris i.e., Arteris and NeoMagic go up and down completely randomly.

Pair Corralation between Arteris and NeoMagic

If you would invest  869.00  in Arteris on October 20, 2024 and sell it today you would earn a total of  279.00  from holding Arteris or generate 32.11% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	0.79%
Values	Daily Returns

Arteris  vs.  NeoMagic

Arteris

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Arteris are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak forward indicators, Arteris reported solid returns over the last few months and may actually be approaching a breakup point.

NeoMagic

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Arteris and NeoMagic

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

The idea behind Arteris and NeoMagic 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.