Correlation Between AVerMedia Technologies and Pan Asia
Can any of the company-specific risk be diversified away by investing in both AVerMedia Technologies and Pan Asia 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 Pan Asia into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between AVerMedia Technologies and Pan Asia Chemical, you can compare the effects of market volatilities on AVerMedia Technologies and Pan Asia 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 Pan Asia. Check out your portfolio center. Please also check ongoing floating volatility patterns of AVerMedia Technologies and Pan Asia.
Diversification Opportunities for AVerMedia Technologies and Pan Asia
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between AVerMedia and Pan is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding AVerMedia Technologies and Pan Asia Chemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pan Asia Chemical 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 Pan Asia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pan Asia Chemical has no effect on the direction of AVerMedia Technologies i.e., AVerMedia Technologies and Pan Asia go up and down completely randomly.
Pair Corralation between AVerMedia Technologies and Pan Asia
Assuming the 90 days trading horizon AVerMedia Technologies is expected to generate 2.97 times more return on investment than Pan Asia. However, AVerMedia Technologies is 2.97 times more volatile than Pan Asia Chemical. It trades about 0.19 of its potential returns per unit of risk. Pan Asia Chemical is currently generating about -0.09 per unit of risk. If you would invest 3,960 in AVerMedia Technologies on September 14, 2024 and sell it today you would earn a total of 335.00 from holding AVerMedia Technologies or generate 8.46% 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. Pan Asia Chemical
Performance |
| Timeline |
| AVerMedia Technologies |
| Pan Asia Chemical |
AVerMedia Technologies and Pan Asia Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with AVerMedia Technologies and Pan Asia
The main advantage of trading using opposite AVerMedia Technologies and Pan Asia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AVerMedia Technologies position performs unexpectedly, Pan Asia 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 Pan Asia will offset losses from the drop in Pan Asia's long position.The idea behind AVerMedia Technologies and Pan Asia Chemical 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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