Correlation Between Indie Semiconductor and Aehr Test

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

By analyzing existing cross correlation between indie Semiconductor and Aehr Test Systems, you can compare the effects of market volatilities on Indie Semiconductor and Aehr Test 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 Indie Semiconductor with a short position of Aehr Test. Check out your portfolio center. Please also check ongoing floating volatility patterns of Indie Semiconductor and Aehr Test.

Diversification Opportunities for Indie Semiconductor and Aehr Test

-0.35

Correlation Coefficient

Indie Semiconductor  Aehr Test

Very good diversification

The 3 months correlation between Indie and Aehr is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding indie Semiconductor and Aehr Test Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aehr Test Systems and Indie Semiconductor 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 indie Semiconductor are associated (or correlated) with Aehr Test. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aehr Test Systems has no effect on the direction of Indie Semiconductor i.e., Indie Semiconductor and Aehr Test go up and down completely randomly.

Pair Corralation between Indie Semiconductor and Aehr Test

Given the investment horizon of 90 days Indie Semiconductor is expected to generate 2.99 times less return on investment than Aehr Test. But when comparing it to its historical volatility, indie Semiconductor is 1.73 times less risky than Aehr Test. It trades about 0.21 of its potential returns per unit of risk. Aehr Test Systems is currently generating about 0.36 of returns per unit of risk over similar time horizon. If you would invest  1,118  in Aehr Test Systems on October 6, 2024 and sell it today you would earn a total of  609.00  from holding Aehr Test Systems or generate 54.47% return on investment over 90 days.

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

indie Semiconductor  vs.  Aehr Test Systems

indie Semiconductor

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in indie Semiconductor are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite fairly uncertain fundamental indicators, Indie Semiconductor demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Aehr Test Systems

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Aehr Test Systems are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak technical indicators, Aehr Test reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Indie Semiconductor and Aehr Test

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

The idea behind indie Semiconductor and Aehr Test Systems 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.