Correlation Between Snap and AXT
Can any of the company-specific risk be diversified away by investing in both Snap and AXT 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 Snap and AXT into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Snap Inc and AXT Inc, you can compare the effects of market volatilities on Snap and AXT 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 Snap with a short position of AXT. Check out your portfolio center. Please also check ongoing floating volatility patterns of Snap and AXT.
Diversification Opportunities for Snap and AXT
Very good diversification
The 3 months correlation between Snap and AXT is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Snap Inc and AXT Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AXT Inc and Snap 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 Snap Inc are associated (or correlated) with AXT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AXT Inc has no effect on the direction of Snap i.e., Snap and AXT go up and down completely randomly.
Pair Corralation between Snap and AXT
Given the investment horizon of 90 days Snap Inc is expected to generate 0.59 times more return on investment than AXT. However, Snap Inc is 1.69 times less risky than AXT. It trades about -0.11 of its potential returns per unit of risk. AXT Inc is currently generating about -0.24 per unit of risk. If you would invest 1,262 in Snap Inc on August 31, 2024 and sell it today you would lose (101.00) from holding Snap Inc or give up 8.0% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Snap Inc vs. AXT Inc
Performance |
| Timeline |
| Snap Inc |
| AXT Inc |
Snap and AXT Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Snap and AXT
The main advantage of trading using opposite Snap and AXT positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Snap position performs unexpectedly, AXT 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 AXT will offset losses from the drop in AXT's long position.The idea behind Snap Inc and AXT Inc 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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