Correlation Between Advantech and Integrated Service

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

By analyzing existing cross correlation between Advantech Co and Integrated Service Technology, you can compare the effects of market volatilities on Advantech and Integrated Service 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 Integrated Service. Check out your portfolio center. Please also check ongoing floating volatility patterns of Advantech and Integrated Service.

Diversification Opportunities for Advantech and Integrated Service

-0.64

Correlation Coefficient

Advantech  Integrated Service

Excellent diversification

The 3 months correlation between Advantech and Integrated is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding Advantech Co and Integrated Service Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Integrated Service 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 Integrated Service. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Integrated Service has no effect on the direction of Advantech i.e., Advantech and Integrated Service go up and down completely randomly.

Pair Corralation between Advantech and Integrated Service

Assuming the 90 days trading horizon Advantech Co is expected to generate 0.57 times more return on investment than Integrated Service. However, Advantech Co is 1.75 times less risky than Integrated Service. It trades about 0.1 of its potential returns per unit of risk. Integrated Service Technology is currently generating about -0.05 per unit of risk. If you would invest  32,350  in Advantech Co on September 12, 2024 and sell it today you would earn a total of  3,000  from holding Advantech Co or generate 9.27% return on investment over 90 days.

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

Advantech Co  vs.  Integrated Service Technology

Advantech

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Advantech Co are ranked lower than 7 (%) 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.

Integrated Service

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Integrated Service Technology 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 Integrated Service

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

The idea behind Advantech Co and Integrated Service Technology 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.