Correlation Between Solid State and Adata Technology
Can any of the company-specific risk be diversified away by investing in both Solid State and Adata 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 Solid State and Adata Technology into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Solid State System and Adata Technology Co, you can compare the effects of market volatilities on Solid State and Adata 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 Solid State with a short position of Adata Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Solid State and Adata Technology.
Diversification Opportunities for Solid State and Adata Technology
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Solid and Adata is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Solid State System and Adata Technology Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Adata Technology and Solid State 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 Solid State System are associated (or correlated) with Adata Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Adata Technology has no effect on the direction of Solid State i.e., Solid State and Adata Technology go up and down completely randomly.
Pair Corralation between Solid State and Adata Technology
Assuming the 90 days trading horizon Solid State System is expected to under-perform the Adata Technology. In addition to that, Solid State is 1.23 times more volatile than Adata Technology Co. It trades about -0.12 of its total potential returns per unit of risk. Adata Technology Co is currently generating about -0.03 per unit of volatility. If you would invest 8,280 in Adata Technology Co on November 3, 2024 and sell it today you would lose (580.00) from holding Adata Technology Co or give up 7.0% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Solid State System vs. Adata Technology Co
Performance |
| Timeline |
| Solid State System |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| Adata Technology |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Solid State and Adata Technology Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Solid State and Adata Technology
The main advantage of trading using opposite Solid State and Adata Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Solid State position performs unexpectedly, Adata 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 Adata Technology will offset losses from the drop in Adata Technology's long position.The idea behind Solid State System and Adata Technology Co 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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