Correlation Between Trend Micro and Akamai Technologies

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

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

Diversification Opportunities for Trend Micro and Akamai Technologies

0.24

Correlation Coefficient

Trend Micro  Akamai Technologies

Modest diversification

The 3 months correlation between Trend and Akamai is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Trend Micro ADR and Akamai Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Akamai Technologies and Trend Micro 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 Trend Micro ADR are associated (or correlated) with Akamai Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Akamai Technologies has no effect on the direction of Trend Micro i.e., Trend Micro and Akamai Technologies go up and down completely randomly.

Pair Corralation between Trend Micro and Akamai Technologies

Assuming the 90 days horizon Trend Micro is expected to generate 2.47 times less return on investment than Akamai Technologies. In addition to that, Trend Micro is 1.22 times more volatile than Akamai Technologies. It trades about 0.14 of its total potential returns per unit of risk. Akamai Technologies is currently generating about 0.41 per unit of volatility. If you would invest  8,596  in Akamai Technologies on September 18, 2024 and sell it today you would earn a total of  1,134  from holding Akamai Technologies or generate 13.19% return on investment over 90 days.

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

Trend Micro ADR  vs.  Akamai Technologies

Trend Micro ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Trend Micro ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Akamai Technologies

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Akamai Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Akamai Technologies is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Trend Micro and Akamai Technologies

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

The idea behind Trend Micro ADR and Akamai Technologies 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.