Correlation Between AVerMedia Technologies and Penpower Technology

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

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

Diversification Opportunities for AVerMedia Technologies and Penpower Technology

-0.37

Correlation Coefficient

AVerMedia Technologies  Penpower Technology

Very good diversification

The 3 months correlation between AVerMedia and Penpower is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding AVerMedia Technologies and Penpower Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Penpower Technology 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 Penpower Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Penpower Technology has no effect on the direction of AVerMedia Technologies i.e., AVerMedia Technologies and Penpower Technology go up and down completely randomly.

Pair Corralation between AVerMedia Technologies and Penpower Technology

Assuming the 90 days trading horizon AVerMedia Technologies is expected to generate 1.06 times more return on investment than Penpower Technology. However, AVerMedia Technologies is 1.06 times more volatile than Penpower Technology. It trades about 0.08 of its potential returns per unit of risk. Penpower Technology is currently generating about 0.03 per unit of risk. If you would invest  4,560  in AVerMedia Technologies on September 27, 2024 and sell it today you would earn a total of  490.00  from holding AVerMedia Technologies or generate 10.75% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

AVerMedia Technologies  vs.  Penpower Technology

AVerMedia Technologies

Risk-Adjusted Performance

6 of 100

Insignificant

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

Penpower Technology

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Penpower Technology are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Penpower Technology 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 AVerMedia Technologies and Penpower Technology

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

The idea behind AVerMedia Technologies and Penpower 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.