Correlation Between Acer and Arbor Technology
Can any of the company-specific risk be diversified away by investing in both Acer and Arbor Technology 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 Acer and Arbor Technology into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Acer Inc and Arbor Technology, you can compare the effects of market volatilities on Acer and Arbor Technology 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 Acer with a short position of Arbor Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Acer and Arbor Technology.
Diversification Opportunities for Acer and Arbor Technology
-0.55 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Acer and Arbor is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Acer Inc and Arbor Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arbor Technology and Acer 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 Acer Inc are associated (or correlated) with Arbor Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arbor Technology has no effect on the direction of Acer i.e., Acer and Arbor Technology go up and down completely randomly.
Pair Corralation between Acer and Arbor Technology
Assuming the 90 days trading horizon Acer Inc is expected to generate 0.5 times more return on investment than Arbor Technology. However, Acer Inc is 2.02 times less risky than Arbor Technology. It trades about -0.27 of its potential returns per unit of risk. Arbor Technology is currently generating about -0.37 per unit of risk. If you would invest 3,900 in Acer Inc on November 4, 2024 and sell it today you would lose (180.00) from holding Acer Inc or give up 4.62% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Acer Inc vs. Arbor Technology
Performance |
| Timeline |
| Acer Inc |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| Arbor Technology |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
OK
Acer and Arbor Technology Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Acer and Arbor Technology
The main advantage of trading using opposite Acer and Arbor Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Acer position performs unexpectedly, Arbor Technology 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 Arbor Technology will offset losses from the drop in Arbor Technology's long position.The idea behind Acer Inc and Arbor Technology 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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