Correlation Between Information Technology and AVerMedia Technologies
Can any of the company-specific risk be diversified away by investing in both Information Technology and AVerMedia Technologies 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 Information Technology and AVerMedia Technologies into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Information Technology Total and AVerMedia Technologies, you can compare the effects of market volatilities on Information Technology and AVerMedia Technologies 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 Information Technology with a short position of AVerMedia Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Information Technology and AVerMedia Technologies.
Diversification Opportunities for Information Technology and AVerMedia Technologies
-0.46 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Information and AVerMedia is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Information Technology Total and AVerMedia Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AVerMedia Technologies and Information 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 Information Technology Total are associated (or correlated) with AVerMedia Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AVerMedia Technologies has no effect on the direction of Information Technology i.e., Information Technology and AVerMedia Technologies go up and down completely randomly.
Pair Corralation between Information Technology and AVerMedia Technologies
Assuming the 90 days trading horizon Information Technology Total is expected to under-perform the AVerMedia Technologies. But the stock apears to be less risky and, when comparing its historical volatility, Information Technology Total is 1.66 times less risky than AVerMedia Technologies. The stock trades about -0.02 of its potential returns per unit of risk. The AVerMedia Technologies is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 3,725 in AVerMedia Technologies on September 3, 2024 and sell it today you would earn a total of 385.00 from holding AVerMedia Technologies or generate 10.34% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Information Technology Total vs. AVerMedia Technologies
Performance |
| Timeline |
| Information Technology |
| AVerMedia Technologies |
Information Technology and AVerMedia Technologies Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Information Technology and AVerMedia Technologies
The main advantage of trading using opposite Information Technology and AVerMedia Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Information Technology position performs unexpectedly, AVerMedia Technologies 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 AVerMedia Technologies will offset losses from the drop in AVerMedia Technologies' long position.The idea behind Information Technology Total and AVerMedia Technologies 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.
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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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