Correlation Between Greatek Electronics and Ardentec

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

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

Diversification Opportunities for Greatek Electronics and Ardentec

0.49

Correlation Coefficient

Greatek Electronics  Ardentec

Very weak diversification

The 3 months correlation between Greatek and Ardentec is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Greatek Electronics and Ardentec in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ardentec and Greatek Electronics 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 Greatek Electronics are associated (or correlated) with Ardentec. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ardentec has no effect on the direction of Greatek Electronics i.e., Greatek Electronics and Ardentec go up and down completely randomly.

Pair Corralation between Greatek Electronics and Ardentec

Assuming the 90 days trading horizon Greatek Electronics is expected to under-perform the Ardentec. But the stock apears to be less risky and, when comparing its historical volatility, Greatek Electronics is 2.45 times less risky than Ardentec. The stock trades about -0.09 of its potential returns per unit of risk. The Ardentec is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  5,450  in Ardentec on September 23, 2024 and sell it today you would lose (20.00) from holding Ardentec or give up 0.37% of portfolio value over 90 days.

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

Greatek Electronics  vs.  Ardentec

Greatek Electronics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Greatek Electronics has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Greatek Electronics is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Ardentec

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ardentec 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 Greatek Electronics and Ardentec

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

The idea behind Greatek Electronics and Ardentec 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 Anywhere module to track or share privately all of your investments from the convenience of any device.