Correlation Between Advantech and Information Technology
Can any of the company-specific risk be diversified away by investing in both Advantech and Information 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 Advantech and Information Technology into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Advantech Co and Information Technology Total, you can compare the effects of market volatilities on Advantech and Information 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 Advantech with a short position of Information Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Advantech and Information Technology.
Diversification Opportunities for Advantech and Information Technology
0.04 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Advantech and Information is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Advantech Co and Information Technology Total in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Information Technology and Advantech 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 Advantech Co are associated (or correlated) with Information Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Information Technology has no effect on the direction of Advantech i.e., Advantech and Information Technology go up and down completely randomly.
Pair Corralation between Advantech and Information Technology
Assuming the 90 days trading horizon Advantech Co is expected to under-perform the Information Technology. But the stock apears to be less risky and, when comparing its historical volatility, Advantech Co is 1.26 times less risky than Information Technology. The stock trades about -0.03 of its potential returns per unit of risk. The Information Technology Total is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest 4,470 in Information Technology Total on September 3, 2024 and sell it today you would lose (10.00) from holding Information Technology Total or give up 0.22% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Advantech Co vs. Information Technology Total
Performance |
| Timeline |
| Advantech |
| Information Technology |
Advantech and Information Technology Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Advantech and Information Technology
The main advantage of trading using opposite Advantech and Information Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Advantech position performs unexpectedly, Information 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 Information Technology will offset losses from the drop in Information Technology's long position.| Advantech vs. Taiwan Semiconductor Manufacturing | Advantech vs. Yang Ming Marine | Advantech vs. ASE Industrial Holding | Advantech vs. AU Optronics |
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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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