Correlation Between Advanced Ceramic and AVerMedia Technologies

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

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

Diversification Opportunities for Advanced Ceramic and AVerMedia Technologies

0.58

Correlation Coefficient

Advanced Ceramic  AVerMedia Technologies

Very weak diversification

The 3 months correlation between Advanced and AVerMedia is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Advanced Ceramic X and AVerMedia Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AVerMedia Technologies and Advanced Ceramic 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 Advanced Ceramic X are associated (or correlated) with AVerMedia Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AVerMedia Technologies has no effect on the direction of Advanced Ceramic i.e., Advanced Ceramic and AVerMedia Technologies go up and down completely randomly.

Pair Corralation between Advanced Ceramic and AVerMedia Technologies

Assuming the 90 days trading horizon Advanced Ceramic is expected to generate 1.26 times less return on investment than AVerMedia Technologies. In addition to that, Advanced Ceramic is 1.15 times more volatile than AVerMedia Technologies. It trades about 0.05 of its total potential returns per unit of risk. AVerMedia Technologies is currently generating about 0.07 per unit of volatility. If you would invest  4,380  in AVerMedia Technologies on September 21, 2024 and sell it today you would earn a total of  380.00  from holding AVerMedia Technologies or generate 8.68% return on investment over 90 days.

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

Advanced Ceramic X  vs.  AVerMedia Technologies

Advanced Ceramic X

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Advanced Ceramic X are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Advanced Ceramic may actually be approaching a critical reversion point that can send shares even higher in January 2025.

AVerMedia Technologies

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in AVerMedia Technologies are ranked lower than 5 (%) 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.

Pair Trading with Advanced Ceramic and AVerMedia Technologies

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

The idea behind Advanced Ceramic X and AVerMedia Technologies 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.