Correlation Between Advantech and AVerMedia Technologies

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

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

Diversification Opportunities for Advantech and AVerMedia Technologies

0.2

Correlation Coefficient

Advantech  AVerMedia Technologies

Modest diversification

The 3 months correlation between Advantech and AVerMedia is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Advantech Co and AVerMedia Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AVerMedia Technologies and Advantech 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 Advantech Co are associated (or correlated) with AVerMedia Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AVerMedia Technologies has no effect on the direction of Advantech i.e., Advantech and AVerMedia Technologies go up and down completely randomly.

Pair Corralation between Advantech and AVerMedia Technologies

Assuming the 90 days trading horizon Advantech Co is expected to generate 0.78 times more return on investment than AVerMedia Technologies. However, Advantech Co is 1.28 times less risky than AVerMedia Technologies. It trades about 0.08 of its potential returns per unit of risk. AVerMedia Technologies is currently generating about -0.07 per unit of risk. If you would invest  32,400  in Advantech Co on September 4, 2024 and sell it today you would earn a total of  2,300  from holding Advantech Co or generate 7.1% return on investment over 90 days.

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

Advantech Co  vs.  AVerMedia Technologies

Advantech

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Advantech Co are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Advantech may actually be approaching a critical reversion point that can send shares even higher in January 2025.

AVerMedia Technologies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AVerMedia Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Pair Trading with Advantech and AVerMedia Technologies

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

The idea behind Advantech Co and AVerMedia 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.