Correlation Between EMCORE and AXT

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

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

Diversification Opportunities for EMCORE and AXT

-0.63

Correlation Coefficient

EMCORE  AXT

Excellent diversification

The 3 months correlation between EMCORE and AXT is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding EMCORE and AXT Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AXT Inc and EMCORE 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 EMCORE are associated (or correlated) with AXT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AXT Inc has no effect on the direction of EMCORE i.e., EMCORE and AXT go up and down completely randomly.

Pair Corralation between EMCORE and AXT

Given the investment horizon of 90 days EMCORE is expected to generate 0.08 times more return on investment than AXT. However, EMCORE is 11.97 times less risky than AXT. It trades about 0.1 of its potential returns per unit of risk. AXT Inc is currently generating about -0.05 per unit of risk. If you would invest  303.00  in EMCORE on December 27, 2024 and sell it today you would earn a total of  7.00  from holding EMCORE or generate 2.31% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	71.67%
Values	Daily Returns

EMCORE  vs.  AXT Inc

EMCORE

Risk-Adjusted Performance

OK

Over the last 90 days EMCORE has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable forward-looking signals, EMCORE is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

AXT Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days AXT Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in April 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with EMCORE and AXT

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

The idea behind EMCORE and AXT Inc 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.