Correlation Between Advanced Information and Premier Marketing

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

Diversification Opportunities for Advanced Information and Premier Marketing

0.65

Correlation Coefficient

Advanced Information  Premier Marketing

Poor diversification

The 3 months correlation between Advanced and Premier is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Advanced Information Technolog and Premier Marketing Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Premier Marketing 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 Premier Marketing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Premier Marketing Public has no effect on the direction of Advanced Information i.e., Advanced Information and Premier Marketing go up and down completely randomly.

Pair Corralation between Advanced Information and Premier Marketing

Assuming the 90 days trading horizon Advanced Information is expected to generate 3.6 times less return on investment than Premier Marketing. But when comparing it to its historical volatility, Advanced Information Technology is 1.05 times less risky than Premier Marketing. It trades about 0.02 of its potential returns per unit of risk. Premier Marketing Public is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  825.00  in Premier Marketing Public on September 12, 2024 and sell it today you would earn a total of  65.00  from holding Premier Marketing Public or generate 7.88% return on investment over 90 days.

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

Advanced Information Technolog  vs.  Premier Marketing Public

Advanced Information

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Advanced Information Technology are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. 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.

Premier Marketing Public

Risk-Adjusted Performance

5 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Premier Marketing Public are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting fundamental drivers, Premier Marketing may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Advanced Information and Premier Marketing

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

The idea behind Advanced Information Technology and Premier Marketing 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.