Correlation Between Ardentec and Grand Plastic
Can any of the company-specific risk be diversified away by investing in both Ardentec and Grand Plastic 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 Ardentec and Grand Plastic into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ardentec and Grand Plastic Technology, you can compare the effects of market volatilities on Ardentec and Grand Plastic 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 Ardentec with a short position of Grand Plastic. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ardentec and Grand Plastic.
Diversification Opportunities for Ardentec and Grand Plastic
-0.56 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Ardentec and Grand is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding Ardentec and Grand Plastic Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Grand Plastic Technology and Ardentec 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 Ardentec are associated (or correlated) with Grand Plastic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Grand Plastic Technology has no effect on the direction of Ardentec i.e., Ardentec and Grand Plastic go up and down completely randomly.
Pair Corralation between Ardentec and Grand Plastic
Assuming the 90 days trading horizon Ardentec is expected to generate 29.5 times less return on investment than Grand Plastic. But when comparing it to its historical volatility, Ardentec is 1.97 times less risky than Grand Plastic. It trades about 0.01 of its potential returns per unit of risk. Grand Plastic Technology is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 69,928 in Grand Plastic Technology on November 3, 2024 and sell it today you would earn a total of 79,072 from holding Grand Plastic Technology or generate 113.08% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ardentec vs. Grand Plastic Technology
Performance |
| Timeline |
| Ardentec |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Good
| Grand Plastic Technology |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Ardentec and Grand Plastic Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ardentec and Grand Plastic
The main advantage of trading using opposite Ardentec and Grand Plastic positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ardentec position performs unexpectedly, Grand Plastic 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 Grand Plastic will offset losses from the drop in Grand Plastic's long position.The idea behind Ardentec and Grand Plastic Technology 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
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