Correlation Between AdvanceTC and Frequency Electronics

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

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

Diversification Opportunities for AdvanceTC and Frequency Electronics

0.19

Correlation Coefficient

AdvanceTC  Frequency Electronics

Average diversification

The 3 months correlation between AdvanceTC and Frequency is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding AdvanceTC Limited and Frequency Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Frequency Electronics and AdvanceTC 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 AdvanceTC Limited are associated (or correlated) with Frequency Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Frequency Electronics has no effect on the direction of AdvanceTC i.e., AdvanceTC and Frequency Electronics go up and down completely randomly.

Pair Corralation between AdvanceTC and Frequency Electronics

Assuming the 90 days horizon AdvanceTC Limited is expected to generate 39.6 times more return on investment than Frequency Electronics. However, AdvanceTC is 39.6 times more volatile than Frequency Electronics. It trades about 0.1 of its potential returns per unit of risk. Frequency Electronics is currently generating about -0.08 per unit of risk. If you would invest  0.11  in AdvanceTC Limited on December 30, 2024 and sell it today you would earn a total of  0.00  from holding AdvanceTC Limited or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	96.88%
Values	Daily Returns

AdvanceTC Limited  vs.  Frequency Electronics

AdvanceTC Limited

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in AdvanceTC Limited are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly unfluctuating essential indicators, AdvanceTC reported solid returns over the last few months and may actually be approaching a breakup point.

Frequency Electronics

Risk-Adjusted Performance

Very Weak

Over the last 90 days Frequency Electronics has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's forward indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with AdvanceTC and Frequency Electronics

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

The idea behind AdvanceTC Limited and Frequency Electronics 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.