Correlation Between ARCA Japan and Aehr Test
Can any of the company-specific risk be diversified away by investing in both ARCA Japan and Aehr Test 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 ARCA Japan and Aehr Test into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ARCA Japan and Aehr Test Systems, you can compare the effects of market volatilities on ARCA Japan and Aehr Test 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 ARCA Japan with a short position of Aehr Test. Check out your portfolio center. Please also check ongoing floating volatility patterns of ARCA Japan and Aehr Test.
Diversification Opportunities for ARCA Japan and Aehr Test
0.09 | Correlation Coefficient |
Significant diversification
The 3 months correlation between ARCA and Aehr is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding ARCA Japan and Aehr Test Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aehr Test Systems and ARCA Japan 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 ARCA Japan are associated (or correlated) with Aehr Test. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aehr Test Systems has no effect on the direction of ARCA Japan i.e., ARCA Japan and Aehr Test go up and down completely randomly.
Pair Corralation between ARCA Japan and Aehr Test
Assuming the 90 days trading horizon ARCA Japan is expected to generate 0.19 times more return on investment than Aehr Test. However, ARCA Japan is 5.25 times less risky than Aehr Test. It trades about -0.06 of its potential returns per unit of risk. Aehr Test Systems is currently generating about -0.21 per unit of risk. If you would invest 36,223 in ARCA Japan on August 31, 2024 and sell it today you would lose (369.00) from holding ARCA Japan or give up 1.02% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 81.82% |
| Values | Daily Returns |
ARCA Japan vs. Aehr Test Systems
Performance |
| Timeline |
ARCA Japan and Aehr Test Volatility Contrast
Predicted Return Density |
| Returns |
ARCA Japan
Pair trading matchups for ARCA Japan
Aehr Test Systems
Pair trading matchups for Aehr Test
Pair Trading with ARCA Japan and Aehr Test
The main advantage of trading using opposite ARCA Japan and Aehr Test positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ARCA Japan position performs unexpectedly, Aehr Test 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 Aehr Test will offset losses from the drop in Aehr Test's long position.| ARCA Japan vs. Aehr Test Systems | ARCA Japan vs. Spyre Therapeutics | ARCA Japan vs. Tower Semiconductor | ARCA Japan vs. Catalyst Pharmaceuticals |
| Aehr Test vs. Photronics | Aehr Test vs. Lam Research Corp | Aehr Test vs. KLA Tencor | Aehr Test vs. Kulicke and Soffa |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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