Correlation Between Cipherlab and Accton Technology

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

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

Diversification Opportunities for Cipherlab and Accton Technology

-0.78

Correlation Coefficient

Cipherlab  Accton Technology

Pay attention - limited upside

The 3 months correlation between Cipherlab and Accton is -0.78. Overlapping area represents the amount of risk that can be diversified away by holding Cipherlab Co and Accton Technology Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Accton Technology Corp and Cipherlab 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 Cipherlab Co are associated (or correlated) with Accton Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Accton Technology Corp has no effect on the direction of Cipherlab i.e., Cipherlab and Accton Technology go up and down completely randomly.

Pair Corralation between Cipherlab and Accton Technology

Assuming the 90 days trading horizon Cipherlab Co is expected to under-perform the Accton Technology. But the stock apears to be less risky and, when comparing its historical volatility, Cipherlab Co is 1.57 times less risky than Accton Technology. The stock trades about -0.1 of its potential returns per unit of risk. The Accton Technology Corp is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  55,000  in Accton Technology Corp on September 25, 2024 and sell it today you would earn a total of  21,300  from holding Accton Technology Corp or generate 38.73% return on investment over 90 days.

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

Cipherlab Co  vs.  Accton Technology Corp

Cipherlab

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cipherlab Co 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.

Accton Technology Corp

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Accton Technology Corp are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Accton Technology showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Cipherlab and Accton Technology

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

The idea behind Cipherlab Co and Accton Technology Corp 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.