Correlation Between Advanced Information and AddTech Hub

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

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

Diversification Opportunities for Advanced Information and AddTech Hub

-0.23

Correlation Coefficient

Advanced Information  AddTech Hub

Very good diversification

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

Pair Corralation between Advanced Information and AddTech Hub

Assuming the 90 days trading horizon Advanced Information Technology is expected to generate 1.16 times more return on investment than AddTech Hub. However, Advanced Information is 1.16 times more volatile than AddTech Hub Public. It trades about 0.04 of its potential returns per unit of risk. AddTech Hub Public is currently generating about -0.02 per unit of risk. If you would invest  414.00  in Advanced Information Technology on September 13, 2024 and sell it today you would earn a total of  8.00  from holding Advanced Information Technology or generate 1.93% return on investment over 90 days.

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

Advanced Information Technolog  vs.  AddTech Hub Public

Advanced Information

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Advanced Information Technology has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Advanced Information is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

AddTech Hub Public

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in AddTech Hub Public are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent fundamental indicators, AddTech Hub 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 Information and AddTech Hub

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

The idea behind Advanced Information Technology and AddTech Hub 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.