Correlation Between Ametek and CVD Equipment

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

By analyzing existing cross correlation between Ametek Inc and CVD Equipment, you can compare the effects of market volatilities on Ametek and CVD Equipment 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 Ametek with a short position of CVD Equipment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ametek and CVD Equipment.

Diversification Opportunities for Ametek and CVD Equipment

-0.18

Correlation Coefficient

Ametek  CVD Equipment

Good diversification

The 3 months correlation between Ametek and CVD is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding Ametek Inc and CVD Equipment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CVD Equipment and Ametek 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 Ametek Inc are associated (or correlated) with CVD Equipment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CVD Equipment has no effect on the direction of Ametek i.e., Ametek and CVD Equipment go up and down completely randomly.

Pair Corralation between Ametek and CVD Equipment

Considering the 90-day investment horizon Ametek Inc is expected to under-perform the CVD Equipment. But the stock apears to be less risky and, when comparing its historical volatility, Ametek Inc is 8.8 times less risky than CVD Equipment. The stock trades about -0.2 of its potential returns per unit of risk. The CVD Equipment is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  288.00  in CVD Equipment on September 13, 2024 and sell it today you would earn a total of  65.00  from holding CVD Equipment or generate 22.57% return on investment over 90 days.

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

Ametek Inc  vs.  CVD Equipment

Ametek Inc

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Ametek Inc are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile primary indicators, Ametek exhibited solid returns over the last few months and may actually be approaching a breakup point.

CVD Equipment

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in CVD Equipment are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, CVD Equipment may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Ametek and CVD Equipment

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

The idea behind Ametek Inc and CVD Equipment 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.