Correlation Between Powertech Technology and Ardentec
Can any of the company-specific risk be diversified away by investing in both Powertech Technology and Ardentec 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 Powertech Technology and Ardentec into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Powertech Technology and Ardentec, you can compare the effects of market volatilities on Powertech Technology and Ardentec 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 Powertech Technology with a short position of Ardentec. Check out your portfolio center. Please also check ongoing floating volatility patterns of Powertech Technology and Ardentec.
Diversification Opportunities for Powertech Technology and Ardentec
-0.16 | Correlation Coefficient |
Good diversification
The 3 months correlation between Powertech and Ardentec is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Powertech Technology and Ardentec in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ardentec and Powertech 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 Powertech Technology are associated (or correlated) with Ardentec. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ardentec has no effect on the direction of Powertech Technology i.e., Powertech Technology and Ardentec go up and down completely randomly.
Pair Corralation between Powertech Technology and Ardentec
Assuming the 90 days trading horizon Powertech Technology is expected to under-perform the Ardentec. But the stock apears to be less risky and, when comparing its historical volatility, Powertech Technology is 2.3 times less risky than Ardentec. The stock trades about -0.36 of its potential returns per unit of risk. The Ardentec is currently generating about 0.29 of returns per unit of risk over similar time horizon. If you would invest 5,760 in Ardentec on November 7, 2024 and sell it today you would earn a total of 1,040 from holding Ardentec or generate 18.06% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Powertech Technology vs. Ardentec
Performance |
| Timeline |
| Powertech Technology |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| Ardentec |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
OK
Powertech Technology and Ardentec Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Powertech Technology and Ardentec
The main advantage of trading using opposite Powertech Technology and Ardentec positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Powertech Technology position performs unexpectedly, Ardentec 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 Ardentec will offset losses from the drop in Ardentec's long position.The idea behind Powertech Technology and Ardentec 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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