Correlation Between Butterfly Network and Advantest

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

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

Diversification Opportunities for Butterfly Network and Advantest

-0.36

Correlation Coefficient

Butterfly Network  Advantest

Very good diversification

The 3 months correlation between Butterfly and Advantest is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Butterfly Network and Advantest in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Advantest and Butterfly Network 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 Butterfly Network are associated (or correlated) with Advantest. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Advantest has no effect on the direction of Butterfly Network i.e., Butterfly Network and Advantest go up and down completely randomly.

Pair Corralation between Butterfly Network and Advantest

Given the investment horizon of 90 days Butterfly Network is expected to generate 1.85 times more return on investment than Advantest. However, Butterfly Network is 1.85 times more volatile than Advantest. It trades about 0.01 of its potential returns per unit of risk. Advantest is currently generating about -0.04 per unit of risk. If you would invest  331.00  in Butterfly Network on December 5, 2024 and sell it today you would lose (28.00) from holding Butterfly Network or give up 8.46% of portfolio value over 90 days.

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

Butterfly Network  vs.  Advantest

Butterfly Network

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Butterfly Network are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak essential indicators, Butterfly Network may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Advantest

Risk-Adjusted Performance

Very Weak

Over the last 90 days Advantest has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Butterfly Network and Advantest

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

The idea behind Butterfly Network and Advantest 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.