Correlation Between Amphenol and Applied DNA

Can any of the company-specific risk be diversified away by investing in both Amphenol and Applied DNA 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 Amphenol and Applied DNA into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Amphenol and Applied DNA Sciences, you can compare the effects of market volatilities on Amphenol and Applied DNA 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 Amphenol with a short position of Applied DNA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Amphenol and Applied DNA.

Diversification Opportunities for Amphenol and Applied DNA

-0.75

Correlation Coefficient

Amphenol  Applied DNA

Pay attention - limited upside

The 3 months correlation between Amphenol and Applied is -0.75. Overlapping area represents the amount of risk that can be diversified away by holding Amphenol and Applied DNA Sciences in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Applied DNA Sciences and Amphenol 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 Amphenol are associated (or correlated) with Applied DNA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Applied DNA Sciences has no effect on the direction of Amphenol i.e., Amphenol and Applied DNA go up and down completely randomly.

Pair Corralation between Amphenol and Applied DNA

Considering the 90-day investment horizon Amphenol is expected to generate 343.21 times less return on investment than Applied DNA. But when comparing it to its historical volatility, Amphenol is 168.92 times less risky than Applied DNA. It trades about 0.1 of its potential returns per unit of risk. Applied DNA Sciences is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  44.00  in Applied DNA Sciences on January 26, 2024 and sell it today you would earn a total of  433.60  from holding Applied DNA Sciences or generate 985.45% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Amphenol  vs.  Applied DNA Sciences

Amphenol

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Amphenol are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite fairly uncertain basic indicators, Amphenol demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Applied DNA Sciences

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Applied DNA Sciences are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very weak fundamental indicators, Applied DNA displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Amphenol and Applied DNA

The main advantage of trading using opposite Amphenol and Applied DNA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Amphenol position performs unexpectedly, Applied DNA 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 Applied DNA will offset losses from the drop in Applied DNA's long position.

The idea behind Amphenol and Applied DNA Sciences 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.