Correlation Between AJ Advance and Power Solution

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

By analyzing existing cross correlation between AJ Advance Technology and Power Solution Technologies, you can compare the effects of market volatilities on AJ Advance and Power Solution 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 AJ Advance with a short position of Power Solution. Check out your portfolio center. Please also check ongoing floating volatility patterns of AJ Advance and Power Solution.

Diversification Opportunities for AJ Advance and Power Solution

0.82

Correlation Coefficient

AJ Advance  Power Solution

Very poor diversification

The 3 months correlation between AJA and Power is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding AJ Advance Technology and Power Solution Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Power Solution Techn and AJ Advance 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 AJ Advance Technology are associated (or correlated) with Power Solution. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Power Solution Techn has no effect on the direction of AJ Advance i.e., AJ Advance and Power Solution go up and down completely randomly.

Pair Corralation between AJ Advance and Power Solution

Assuming the 90 days trading horizon AJ Advance Technology is expected to generate 1.71 times more return on investment than Power Solution. However, AJ Advance is 1.71 times more volatile than Power Solution Technologies. It trades about -0.04 of its potential returns per unit of risk. Power Solution Technologies is currently generating about -0.18 per unit of risk. If you would invest  19.00  in AJ Advance Technology on September 16, 2024 and sell it today you would lose (3.00) from holding AJ Advance Technology or give up 15.79% of portfolio value over 90 days.

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

AJ Advance Technology  vs.  Power Solution Technologies

AJ Advance Technology

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AJ Advance Technology has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's basic indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Power Solution Techn

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Power Solution Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's forward-looking signals 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 AJ Advance and Power Solution

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

The idea behind AJ Advance Technology and Power Solution Technologies 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.

Check out your portfolio center.

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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.