Correlation Between Asmedia Technology and Ligitek Electronics
Can any of the company-specific risk be diversified away by investing in both Asmedia Technology and Ligitek Electronics 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 Asmedia Technology and Ligitek Electronics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Asmedia Technology and Ligitek Electronics Co, you can compare the effects of market volatilities on Asmedia Technology and Ligitek Electronics 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 Asmedia Technology with a short position of Ligitek Electronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Asmedia Technology and Ligitek Electronics.
Diversification Opportunities for Asmedia Technology and Ligitek Electronics
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Asmedia and Ligitek is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Asmedia Technology and Ligitek Electronics Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ligitek Electronics and Asmedia Technology 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 Asmedia Technology are associated (or correlated) with Ligitek Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ligitek Electronics has no effect on the direction of Asmedia Technology i.e., Asmedia Technology and Ligitek Electronics go up and down completely randomly.
Pair Corralation between Asmedia Technology and Ligitek Electronics
Assuming the 90 days trading horizon Asmedia Technology is expected to generate 5.28 times less return on investment than Ligitek Electronics. In addition to that, Asmedia Technology is 1.07 times more volatile than Ligitek Electronics Co. It trades about 0.02 of its total potential returns per unit of risk. Ligitek Electronics Co is currently generating about 0.13 per unit of volatility. If you would invest 2,115 in Ligitek Electronics Co on November 3, 2024 and sell it today you would earn a total of 3,085 from holding Ligitek Electronics Co or generate 145.86% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Asmedia Technology vs. Ligitek Electronics Co
Performance |
| Timeline |
| Asmedia Technology |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Good
| Ligitek Electronics |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
OK
Asmedia Technology and Ligitek Electronics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Asmedia Technology and Ligitek Electronics
The main advantage of trading using opposite Asmedia Technology and Ligitek Electronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Asmedia Technology position performs unexpectedly, Ligitek Electronics 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 Ligitek Electronics will offset losses from the drop in Ligitek Electronics' long position.The idea behind Asmedia Technology and Ligitek Electronics 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 Transaction History module to view history of all your transactions and understand their impact on performance.
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