Correlation Between Advantech and Lanner Electronics

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

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

Diversification Opportunities for Advantech and Lanner Electronics

0.35

Correlation Coefficient

Advantech  Lanner Electronics

Weak diversification

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

Pair Corralation between Advantech and Lanner Electronics

Assuming the 90 days trading horizon Advantech Co is expected to generate 1.19 times more return on investment than Lanner Electronics. However, Advantech is 1.19 times more volatile than Lanner Electronics. It trades about 0.1 of its potential returns per unit of risk. Lanner Electronics is currently generating about 0.06 per unit of risk. If you would invest  32,150  in Advantech Co on September 30, 2024 and sell it today you would earn a total of  2,950  from holding Advantech Co or generate 9.18% 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.  Lanner Electronics

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.

Lanner Electronics

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Lanner Electronics are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Lanner Electronics is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Advantech and Lanner Electronics

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

The idea behind Advantech Co and Lanner Electronics 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.