Correlation Between Quantum and Super Micro

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

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

Diversification Opportunities for Quantum and Super Micro

-0.13

Correlation Coefficient

Quantum  Super Micro

Good diversification

The 3 months correlation between Quantum and Super is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding Quantum and Super Micro Computer in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Super Micro Computer and Quantum 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 Quantum are associated (or correlated) with Super Micro. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Super Micro Computer has no effect on the direction of Quantum i.e., Quantum and Super Micro go up and down completely randomly.

Pair Corralation between Quantum and Super Micro

Given the investment horizon of 90 days Quantum is expected to generate 3.39 times more return on investment than Super Micro. However, Quantum is 3.39 times more volatile than Super Micro Computer. It trades about 0.23 of its potential returns per unit of risk. Super Micro Computer is currently generating about 0.01 per unit of risk. If you would invest  326.00  in Quantum on September 26, 2024 and sell it today you would earn a total of  4,378  from holding Quantum or generate 1342.94% return on investment over 90 days.

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

Quantum  vs.  Super Micro Computer

Quantum

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Quantum are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of very inconsistent fundamental indicators, Quantum displayed solid returns over the last few months and may actually be approaching a breakup point.

Super Micro Computer

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Super Micro Computer has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly uncertain fundamental indicators, Super Micro may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Quantum and Super Micro

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

The idea behind Quantum and Super Micro Computer 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 Transaction History module to view history of all your transactions and understand their impact on performance.