Correlation Between AVerMedia Technologies and Gem Terminal
Can any of the company-specific risk be diversified away by investing in both AVerMedia Technologies and Gem Terminal 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 AVerMedia Technologies and Gem Terminal into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between AVerMedia Technologies and Gem Terminal Industry, you can compare the effects of market volatilities on AVerMedia Technologies and Gem Terminal 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 AVerMedia Technologies with a short position of Gem Terminal. Check out your portfolio center. Please also check ongoing floating volatility patterns of AVerMedia Technologies and Gem Terminal.
Diversification Opportunities for AVerMedia Technologies and Gem Terminal
0.82 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between AVerMedia and Gem is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding AVerMedia Technologies and Gem Terminal Industry in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gem Terminal Industry and AVerMedia Technologies 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 AVerMedia Technologies are associated (or correlated) with Gem Terminal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gem Terminal Industry has no effect on the direction of AVerMedia Technologies i.e., AVerMedia Technologies and Gem Terminal go up and down completely randomly.
Pair Corralation between AVerMedia Technologies and Gem Terminal
Assuming the 90 days trading horizon AVerMedia Technologies is expected to generate 1.18 times more return on investment than Gem Terminal. However, AVerMedia Technologies is 1.18 times more volatile than Gem Terminal Industry. It trades about 0.07 of its potential returns per unit of risk. Gem Terminal Industry is currently generating about 0.02 per unit of risk. If you would invest 2,105 in AVerMedia Technologies on September 12, 2024 and sell it today you would earn a total of 1,895 from holding AVerMedia Technologies or generate 90.02% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
AVerMedia Technologies vs. Gem Terminal Industry
Performance |
| Timeline |
| AVerMedia Technologies |
| Gem Terminal Industry |
AVerMedia Technologies and Gem Terminal Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with AVerMedia Technologies and Gem Terminal
The main advantage of trading using opposite AVerMedia Technologies and Gem Terminal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AVerMedia Technologies position performs unexpectedly, Gem Terminal 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 Gem Terminal will offset losses from the drop in Gem Terminal's long position.The idea behind AVerMedia Technologies and Gem Terminal Industry 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.
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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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.
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