Correlation Between Phison Electronics and Axiomtek

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

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

Diversification Opportunities for Phison Electronics and Axiomtek

-0.3

Correlation Coefficient

Phison Electronics  Axiomtek

Very good diversification

The 3 months correlation between Phison and Axiomtek is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Phison Electronics and Axiomtek Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Axiomtek and Phison 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 Phison Electronics are associated (or correlated) with Axiomtek. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Axiomtek has no effect on the direction of Phison Electronics i.e., Phison Electronics and Axiomtek go up and down completely randomly.

Pair Corralation between Phison Electronics and Axiomtek

Assuming the 90 days trading horizon Phison Electronics is expected to generate 9.66 times less return on investment than Axiomtek. But when comparing it to its historical volatility, Phison Electronics is 1.08 times less risky than Axiomtek. It trades about 0.02 of its potential returns per unit of risk. Axiomtek Co is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  8,850  in Axiomtek Co on September 29, 2024 and sell it today you would earn a total of  2,700  from holding Axiomtek Co or generate 30.51% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.46%
Values	Daily Returns

Phison Electronics  vs.  Axiomtek Co

Phison Electronics

Risk-Adjusted Performance

1 of 100

Weak

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

Axiomtek

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Axiomtek Co are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Axiomtek showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Phison Electronics and Axiomtek

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

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