Correlation Between AP Memory and FocalTech Systems

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

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

Diversification Opportunities for AP Memory and FocalTech Systems

0.23

Correlation Coefficient

AP Memory  FocalTech Systems

Modest diversification

The 3 months correlation between 6531 and FocalTech is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding AP Memory Technology and FocalTech Systems Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FocalTech Systems and AP Memory 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 AP Memory Technology are associated (or correlated) with FocalTech Systems. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FocalTech Systems has no effect on the direction of AP Memory i.e., AP Memory and FocalTech Systems go up and down completely randomly.

Pair Corralation between AP Memory and FocalTech Systems

Assuming the 90 days trading horizon AP Memory is expected to generate 5.94 times less return on investment than FocalTech Systems. In addition to that, AP Memory is 1.21 times more volatile than FocalTech Systems Co. It trades about 0.02 of its total potential returns per unit of risk. FocalTech Systems Co is currently generating about 0.15 per unit of volatility. If you would invest  7,550  in FocalTech Systems Co on September 4, 2024 and sell it today you would earn a total of  1,280  from holding FocalTech Systems Co or generate 16.95% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.41%
Values	Daily Returns

AP Memory Technology  vs.  FocalTech Systems Co

AP Memory Technology

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in AP Memory Technology are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, AP Memory is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

FocalTech Systems

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in FocalTech Systems Co are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, FocalTech Systems showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with AP Memory and FocalTech Systems

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

The idea behind AP Memory Technology and FocalTech Systems Co 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.