Correlation Between Advanced Info and Premier Products

Can any of the company-specific risk be diversified away by investing in both Advanced Info and Premier Products 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 Premier Products 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 Premier Products Public, you can compare the effects of market volatilities on Advanced Info and Premier Products 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 Premier Products. Check out your portfolio center. Please also check ongoing floating volatility patterns of Advanced Info and Premier Products.

Diversification Opportunities for Advanced Info and Premier Products

-0.39

Correlation Coefficient

Advanced Info  Premier Products

Very good diversification

The 3 months correlation between Advanced and Premier is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Advanced Info Service and Premier Products Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Premier Products 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 Premier Products. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Premier Products Public has no effect on the direction of Advanced Info i.e., Advanced Info and Premier Products go up and down completely randomly.

Pair Corralation between Advanced Info and Premier Products

Assuming the 90 days trading horizon Advanced Info Service is expected to generate 0.69 times more return on investment than Premier Products. However, Advanced Info Service is 1.45 times less risky than Premier Products. It trades about 0.11 of its potential returns per unit of risk. Premier Products Public is currently generating about -0.1 per unit of risk. If you would invest  26,000  in Advanced Info Service on September 29, 2024 and sell it today you would earn a total of  2,900  from holding Advanced Info Service or generate 11.15% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.39%
Values	Daily Returns

Advanced Info Service  vs.  Premier Products Public

Advanced Info Service

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Advanced Info Service are ranked lower than 8 (%) 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.

Premier Products Public

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Premier Products Public has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Advanced Info and Premier Products

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

The idea behind Advanced Info Service and Premier Products 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.