Correlation Between Advanced Info and Applied DB

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

By analyzing existing cross correlation between Advanced Info Service and Applied DB Public, you can compare the effects of market volatilities on Advanced Info and Applied DB 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 Info with a short position of Applied DB. Check out your portfolio center. Please also check ongoing floating volatility patterns of Advanced Info and Applied DB.

Diversification Opportunities for Advanced Info and Applied DB

-0.62

Correlation Coefficient

Advanced Info  Applied DB

Excellent diversification

The 3 months correlation between Advanced and Applied is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Advanced Info Service and Applied DB Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Applied DB Public and Advanced Info 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 Info Service are associated (or correlated) with Applied DB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Applied DB Public has no effect on the direction of Advanced Info i.e., Advanced Info and Applied DB go up and down completely randomly.

Pair Corralation between Advanced Info and Applied DB

Assuming the 90 days trading horizon Advanced Info Service is expected to generate 0.38 times more return on investment than Applied DB. However, Advanced Info Service is 2.61 times less risky than Applied DB. It trades about 0.1 of its potential returns per unit of risk. Applied DB Public is currently generating about -0.01 per unit of risk. If you would invest  26,000  in Advanced Info Service on September 27, 2024 and sell it today you would earn a total of  2,600  from holding Advanced Info Service or generate 10.0% return on investment over 90 days.

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

Advanced Info Service  vs.  Applied DB Public

Advanced Info Service

Risk-Adjusted Performance

7 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Advanced Info Service are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat conflicting basic indicators, Advanced Info may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Applied DB Public

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Applied DB Public has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent fundamental drivers, Applied DB is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Advanced Info and Applied DB

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

The idea behind Advanced Info Service and Applied DB Public 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 Valuation module to check real value of public entities based on technical and fundamental data.