Correlation Between Advanced Energy and Credo Technology
Can any of the company-specific risk be diversified away by investing in both Advanced Energy and Credo Technology 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 Credo Technology into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Advanced Energy Industries and Credo Technology Group, you can compare the effects of market volatilities on Advanced Energy and Credo Technology 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 Credo Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Advanced Energy and Credo Technology.
Diversification Opportunities for Advanced Energy and Credo Technology
0.95 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Advanced and Credo is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Advanced Energy Industries and Credo Technology Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Credo Technology 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 Industries are associated (or correlated) with Credo Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Credo Technology has no effect on the direction of Advanced Energy i.e., Advanced Energy and Credo Technology go up and down completely randomly.
Pair Corralation between Advanced Energy and Credo Technology
Given the investment horizon of 90 days Advanced Energy is expected to generate 3.99 times less return on investment than Credo Technology. But when comparing it to its historical volatility, Advanced Energy Industries is 2.37 times less risky than Credo Technology. It trades about 0.14 of its potential returns per unit of risk. Credo Technology Group is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest 4,043 in Credo Technology Group on September 2, 2024 and sell it today you would earn a total of 853.00 from holding Credo Technology Group or generate 21.1% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Advanced Energy Industries vs. Credo Technology Group
Performance |
| Timeline |
| Advanced Energy Indu |
| Credo Technology |
Advanced Energy and Credo Technology Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Advanced Energy and Credo Technology
The main advantage of trading using opposite Advanced Energy and Credo Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Advanced Energy position performs unexpectedly, Credo Technology 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 Credo Technology will offset losses from the drop in Credo Technology's long position.| Advanced Energy vs. MKS Instruments | Advanced Energy vs. Axcelis Technologies | Advanced Energy vs. Entegris | Advanced Energy vs. Cohu Inc |
| Credo Technology vs. Zebra Technologies | Credo Technology vs. Ubiquiti Networks | Credo Technology vs. Ciena Corp | Credo Technology vs. Clearfield |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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