Correlation Between Digital Telecommunicatio and Amata Summit

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

By analyzing existing cross correlation between Digital Telecommunications Infrastructure and Amata Summit Growth, you can compare the effects of market volatilities on Digital Telecommunicatio and Amata Summit 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 Digital Telecommunicatio with a short position of Amata Summit. Check out your portfolio center. Please also check ongoing floating volatility patterns of Digital Telecommunicatio and Amata Summit.

Diversification Opportunities for Digital Telecommunicatio and Amata Summit

0.7

Correlation Coefficient

Digital Telecommunicatio  Amata Summit

Poor diversification

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

Pair Corralation between Digital Telecommunicatio and Amata Summit

Assuming the 90 days trading horizon Digital Telecommunications Infrastructure is expected to under-perform the Amata Summit. But the stock apears to be less risky and, when comparing its historical volatility, Digital Telecommunications Infrastructure is 1.67 times less risky than Amata Summit. The stock trades about -0.1 of its potential returns per unit of risk. The Amata Summit Growth is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  650.00  in Amata Summit Growth on December 30, 2024 and sell it today you would lose (20.00) from holding Amata Summit Growth or give up 3.08% of portfolio value over 90 days.

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

Digital Telecommunications Inf  vs.  Amata Summit Growth

Digital Telecommunicatio

Risk-Adjusted Performance

Very Weak

Over the last 90 days Digital Telecommunications Infrastructure has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent technical and fundamental indicators, Digital Telecommunicatio is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Amata Summit Growth

Risk-Adjusted Performance

Very Weak

Over the last 90 days Amata Summit Growth has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Amata Summit is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Digital Telecommunicatio and Amata Summit

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

The idea behind Digital Telecommunications Infrastructure and Amata Summit Growth 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.