Correlation Between AJ Advance and DTC Industries

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

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

Diversification Opportunities for AJ Advance and DTC Industries

0.35

Correlation Coefficient

AJ Advance  DTC Industries

Weak diversification

The 3 months correlation between AJA and DTC is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding AJ Advance Technology and DTC Industries Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DTC Industries Public and AJ Advance 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 AJ Advance Technology are associated (or correlated) with DTC Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DTC Industries Public has no effect on the direction of AJ Advance i.e., AJ Advance and DTC Industries go up and down completely randomly.

Pair Corralation between AJ Advance and DTC Industries

Assuming the 90 days trading horizon AJ Advance Technology is expected to under-perform the DTC Industries. But the stock apears to be less risky and, when comparing its historical volatility, AJ Advance Technology is 1.49 times less risky than DTC Industries. The stock trades about -0.08 of its potential returns per unit of risk. The DTC Industries Public is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  3,400  in DTC Industries Public on October 11, 2024 and sell it today you would earn a total of  350.00  from holding DTC Industries Public or generate 10.29% return on investment over 90 days.

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

AJ Advance Technology  vs.  DTC Industries Public

AJ Advance Technology

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AJ Advance Technology has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in February 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

DTC Industries Public

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in DTC Industries Public are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, DTC Industries disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with AJ Advance and DTC Industries

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

The idea behind AJ Advance Technology and DTC Industries 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.

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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.