Correlation Between Advanced Energy and Golden Biotechnology
Can any of the company-specific risk be diversified away by investing in both Advanced Energy and Golden Biotechnology 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 Advanced Energy and Golden Biotechnology into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Advanced Energy Solution and Golden Biotechnology, you can compare the effects of market volatilities on Advanced Energy and Golden Biotechnology 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 Advanced Energy with a short position of Golden Biotechnology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Advanced Energy and Golden Biotechnology.
Diversification Opportunities for Advanced Energy and Golden Biotechnology
-0.69 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Advanced and Golden is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding Advanced Energy Solution and Golden Biotechnology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Golden Biotechnology and Advanced Energy 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 Advanced Energy Solution are associated (or correlated) with Golden Biotechnology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Golden Biotechnology has no effect on the direction of Advanced Energy i.e., Advanced Energy and Golden Biotechnology go up and down completely randomly.
Pair Corralation between Advanced Energy and Golden Biotechnology
Assuming the 90 days trading horizon Advanced Energy Solution is expected to generate 2.09 times more return on investment than Golden Biotechnology. However, Advanced Energy is 2.09 times more volatile than Golden Biotechnology. It trades about 0.17 of its potential returns per unit of risk. Golden Biotechnology is currently generating about -0.31 per unit of risk. If you would invest 80,000 in Advanced Energy Solution on September 19, 2024 and sell it today you would earn a total of 11,200 from holding Advanced Energy Solution or generate 14.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Advanced Energy Solution vs. Golden Biotechnology
Performance |
| Timeline |
| Advanced Energy Solution |
| Golden Biotechnology |
Advanced Energy and Golden Biotechnology Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Advanced Energy and Golden Biotechnology
The main advantage of trading using opposite Advanced Energy and Golden Biotechnology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Advanced Energy position performs unexpectedly, Golden Biotechnology 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 Golden Biotechnology will offset losses from the drop in Golden Biotechnology's long position.The idea behind Advanced Energy Solution and Golden Biotechnology 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.| Golden Biotechnology vs. Hi Lai Foods Co | Golden Biotechnology vs. Tainet Communication System | Golden Biotechnology vs. First Hotel Co | Golden Biotechnology vs. Chief Telecom |
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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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