Correlation Between SmartKem, Common and AXT

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

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

Diversification Opportunities for SmartKem, Common and AXT

-0.16

Correlation Coefficient

SmartKem, Common  AXT

Good diversification

The 3 months correlation between SmartKem, and AXT is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding SmartKem, Common Stock and AXT Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AXT Inc and SmartKem, Common 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 SmartKem, Common Stock are associated (or correlated) with AXT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AXT Inc has no effect on the direction of SmartKem, Common i.e., SmartKem, Common and AXT go up and down completely randomly.

Pair Corralation between SmartKem, Common and AXT

Given the investment horizon of 90 days SmartKem, Common is expected to generate 2.13 times less return on investment than AXT. In addition to that, SmartKem, Common is 2.59 times more volatile than AXT Inc. It trades about 0.01 of its total potential returns per unit of risk. AXT Inc is currently generating about 0.05 per unit of volatility. If you would invest  200.00  in AXT Inc on September 22, 2024 and sell it today you would earn a total of  18.00  from holding AXT Inc or generate 9.0% return on investment over 90 days.

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

SmartKem, Common Stock  vs.  AXT Inc

SmartKem, Common Stock

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SmartKem, Common Stock has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite unfluctuating basic indicators, SmartKem, Common may actually be approaching a critical reversion point that can send shares even higher in January 2025.

AXT Inc

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in AXT Inc are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite fairly unfluctuating basic indicators, AXT demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with SmartKem, Common and AXT

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

The idea behind SmartKem, Common Stock and AXT Inc 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.