Correlation Between Globaltek Fabrication and Advanced Ceramic

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

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

Diversification Opportunities for Globaltek Fabrication and Advanced Ceramic

0.05

Correlation Coefficient

Globaltek Fabrication  Advanced Ceramic

Significant diversification

The 3 months correlation between Globaltek and Advanced is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Globaltek Fabrication Co and Advanced Ceramic X in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Advanced Ceramic X and Globaltek Fabrication 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 Globaltek Fabrication Co are associated (or correlated) with Advanced Ceramic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Advanced Ceramic X has no effect on the direction of Globaltek Fabrication i.e., Globaltek Fabrication and Advanced Ceramic go up and down completely randomly.

Pair Corralation between Globaltek Fabrication and Advanced Ceramic

Assuming the 90 days trading horizon Globaltek Fabrication Co is expected to under-perform the Advanced Ceramic. But the stock apears to be less risky and, when comparing its historical volatility, Globaltek Fabrication Co is 1.07 times less risky than Advanced Ceramic. The stock trades about -0.12 of its potential returns per unit of risk. The Advanced Ceramic X is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  17,600  in Advanced Ceramic X on September 15, 2024 and sell it today you would earn a total of  600.00  from holding Advanced Ceramic X or generate 3.41% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Globaltek Fabrication Co  vs.  Advanced Ceramic X

Globaltek Fabrication

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Globaltek Fabrication Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Advanced Ceramic X

Risk-Adjusted Performance

2 of 100

Weak

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

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

The idea behind Globaltek Fabrication Co and Advanced Ceramic X 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.