Correlation Between Akamai Technologies and Trend Micro

Can any of the company-specific risk be diversified away by investing in both Akamai Technologies and Trend Micro 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 Akamai Technologies and Trend Micro into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Akamai Technologies and Trend Micro ADR, you can compare the effects of market volatilities on Akamai Technologies and Trend Micro 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 Akamai Technologies with a short position of Trend Micro. Check out your portfolio center. Please also check ongoing floating volatility patterns of Akamai Technologies and Trend Micro.

Diversification Opportunities for Akamai Technologies and Trend Micro

0.32

Correlation Coefficient

Akamai Technologies  Trend Micro

Weak diversification

The 3 months correlation between Akamai and Trend is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Akamai Technologies and Trend Micro ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Trend Micro ADR and Akamai Technologies 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 Akamai Technologies are associated (or correlated) with Trend Micro. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Trend Micro ADR has no effect on the direction of Akamai Technologies i.e., Akamai Technologies and Trend Micro go up and down completely randomly.

Pair Corralation between Akamai Technologies and Trend Micro

Given the investment horizon of 90 days Akamai Technologies is expected to generate 2.68 times less return on investment than Trend Micro. But when comparing it to its historical volatility, Akamai Technologies is 1.01 times less risky than Trend Micro. It trades about 0.04 of its potential returns per unit of risk. Trend Micro ADR is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  4,193  in Trend Micro ADR on September 27, 2024 and sell it today you would earn a total of  1,244  from holding Trend Micro ADR or generate 29.67% return on investment over 90 days.

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

Akamai Technologies  vs.  Trend Micro ADR

Akamai Technologies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Akamai Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Akamai Technologies is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Trend Micro ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Trend Micro ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Akamai Technologies and Trend Micro

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

The idea behind Akamai Technologies and Trend Micro ADR 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.