Correlation Between SoundHound and Advantest

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

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

Diversification Opportunities for SoundHound and Advantest

0.64

Correlation Coefficient

SoundHound  Advantest

Poor diversification

The 3 months correlation between SoundHound and Advantest is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding SoundHound AI and Advantest in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Advantest and SoundHound 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 SoundHound AI 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 SoundHound i.e., SoundHound and Advantest go up and down completely randomly.

Pair Corralation between SoundHound and Advantest

Given the investment horizon of 90 days SoundHound AI is expected to generate 2.82 times more return on investment than Advantest. However, SoundHound is 2.82 times more volatile than Advantest. It trades about 0.31 of its potential returns per unit of risk. Advantest is currently generating about 0.21 per unit of risk. If you would invest  485.00  in SoundHound AI on September 18, 2024 and sell it today you would earn a total of  1,484  from holding SoundHound AI or generate 305.98% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.41%
Values	Daily Returns

SoundHound AI  vs.  Advantest

SoundHound AI

Risk-Adjusted Performance

24 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in SoundHound AI are ranked lower than 24 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal basic indicators, SoundHound displayed solid returns over the last few months and may actually be approaching a breakup point.

Advantest

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Advantest are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Advantest reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with SoundHound and Advantest

The main advantage of trading using opposite SoundHound and Advantest positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SoundHound 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 SoundHound AI 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.