Correlation Between Alpha and Skywater Technology

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

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

Diversification Opportunities for Alpha and Skywater Technology

-0.06

Correlation Coefficient

Alpha  Skywater Technology

Good diversification

The 3 months correlation between Alpha and Skywater is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding Alpha and Omega and Skywater Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Skywater Technology and Alpha 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 Alpha and Omega are associated (or correlated) with Skywater Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Skywater Technology has no effect on the direction of Alpha i.e., Alpha and Skywater Technology go up and down completely randomly.

Pair Corralation between Alpha and Skywater Technology

Given the investment horizon of 90 days Alpha and Omega is expected to generate 0.8 times more return on investment than Skywater Technology. However, Alpha and Omega is 1.25 times less risky than Skywater Technology. It trades about 0.06 of its potential returns per unit of risk. Skywater Technology is currently generating about 0.05 per unit of risk. If you would invest  2,645  in Alpha and Omega on September 20, 2024 and sell it today you would earn a total of  1,601  from holding Alpha and Omega or generate 60.53% return on investment over 90 days.

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

Alpha and Omega  vs.  Skywater Technology

Alpha and Omega

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Alpha and Omega are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite quite weak basic indicators, Alpha disclosed solid returns over the last few months and may actually be approaching a breakup point.

Skywater Technology

Risk-Adjusted Performance

10 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Skywater Technology are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively inconsistent basic indicators, Skywater Technology unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Alpha and Skywater Technology

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

The idea behind Alpha and Omega and Skywater Technology 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..