Correlation Between Advanced Ceramic and Standard Foods
Can any of the company-specific risk be diversified away by investing in both Advanced Ceramic and Standard Foods 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 Advanced Ceramic and Standard Foods into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Advanced Ceramic X and Standard Foods Corp, you can compare the effects of market volatilities on Advanced Ceramic and Standard Foods 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 Advanced Ceramic with a short position of Standard Foods. Check out your portfolio center. Please also check ongoing floating volatility patterns of Advanced Ceramic and Standard Foods.
Diversification Opportunities for Advanced Ceramic and Standard Foods
0.4 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Advanced and Standard is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Advanced Ceramic X and Standard Foods Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Standard Foods Corp and Advanced Ceramic 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 Advanced Ceramic X are associated (or correlated) with Standard Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Standard Foods Corp has no effect on the direction of Advanced Ceramic i.e., Advanced Ceramic and Standard Foods go up and down completely randomly.
Pair Corralation between Advanced Ceramic and Standard Foods
Assuming the 90 days trading horizon Advanced Ceramic X is expected to generate 4.12 times more return on investment than Standard Foods. However, Advanced Ceramic is 4.12 times more volatile than Standard Foods Corp. It trades about 0.07 of its potential returns per unit of risk. Standard Foods Corp is currently generating about -0.03 per unit of risk. If you would invest 16,250 in Advanced Ceramic X on September 12, 2024 and sell it today you would earn a total of 1,450 from holding Advanced Ceramic X or generate 8.92% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Advanced Ceramic X vs. Standard Foods Corp
Performance |
| Timeline |
| Advanced Ceramic X |
| Standard Foods Corp |
Advanced Ceramic and Standard Foods Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Advanced Ceramic and Standard Foods
The main advantage of trading using opposite Advanced Ceramic and Standard Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Advanced Ceramic position performs unexpectedly, Standard Foods 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 Standard Foods will offset losses from the drop in Standard Foods' long position.| Advanced Ceramic vs. Gemtek Technology Co | Advanced Ceramic vs. Ruentex Development Co | Advanced Ceramic vs. WiseChip Semiconductor | Advanced Ceramic vs. Novatek Microelectronics Corp |
| Standard Foods vs. Uni President Enterprises Corp | Standard Foods vs. Great Wall Enterprise | Standard Foods vs. Ruentex Development Co | Standard Foods vs. WiseChip Semiconductor |
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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.
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