Correlation Between AVerMedia Technologies and Kaulin Mfg
Can any of the company-specific risk be diversified away by investing in both AVerMedia Technologies and Kaulin Mfg 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 AVerMedia Technologies and Kaulin Mfg into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between AVerMedia Technologies and Kaulin Mfg, you can compare the effects of market volatilities on AVerMedia Technologies and Kaulin Mfg 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 AVerMedia Technologies with a short position of Kaulin Mfg. Check out your portfolio center. Please also check ongoing floating volatility patterns of AVerMedia Technologies and Kaulin Mfg.
Diversification Opportunities for AVerMedia Technologies and Kaulin Mfg
-0.6 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between AVerMedia and Kaulin is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding AVerMedia Technologies and Kaulin Mfg in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kaulin Mfg and AVerMedia Technologies 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 AVerMedia Technologies are associated (or correlated) with Kaulin Mfg. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kaulin Mfg has no effect on the direction of AVerMedia Technologies i.e., AVerMedia Technologies and Kaulin Mfg go up and down completely randomly.
Pair Corralation between AVerMedia Technologies and Kaulin Mfg
Assuming the 90 days trading horizon AVerMedia Technologies is expected to under-perform the Kaulin Mfg. But the stock apears to be less risky and, when comparing its historical volatility, AVerMedia Technologies is 1.57 times less risky than Kaulin Mfg. The stock trades about -0.06 of its potential returns per unit of risk. The Kaulin Mfg is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 1,375 in Kaulin Mfg on September 7, 2024 and sell it today you would earn a total of 230.00 from holding Kaulin Mfg or generate 16.73% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Weak |
Accuracy | 100.0% |
Values | Daily Returns |
AVerMedia Technologies vs. Kaulin Mfg
Performance |
Timeline |
AVerMedia Technologies |
Kaulin Mfg |
AVerMedia Technologies and Kaulin Mfg Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with AVerMedia Technologies and Kaulin Mfg
The main advantage of trading using opposite AVerMedia Technologies and Kaulin Mfg positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AVerMedia Technologies position performs unexpectedly, Kaulin Mfg 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 Kaulin Mfg will offset losses from the drop in Kaulin Mfg's long position.The idea behind AVerMedia Technologies and Kaulin Mfg 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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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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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