Can any of the company-specific risk be diversified away by investing in both Celestica and Akoustis Technologies 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 Celestica and Akoustis Technologies into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Celestica and Akoustis Technologies, you can compare the effects of market volatilities on Celestica and Akoustis Technologies 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 Celestica with a short position of Akoustis Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Celestica and Akoustis Technologies.
Diversification Opportunities for Celestica and Akoustis Technologies
The 3 months correlation between Celestica and Akoustis is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding Celestica and Akoustis Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Akoustis Technologies and Celestica 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 Celestica are associated (or correlated) with Akoustis Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Akoustis Technologies has no effect on the direction of Celestica i.e., Celestica and Akoustis Technologies go up and down completely randomly.
Pair Corralation between Celestica and Akoustis Technologies
Considering the 90-day investment horizon Celestica is expected to generate 0.5 times more return on investment than Akoustis Technologies. However, Celestica is 2.0 times less risky than Akoustis Technologies. It trades about 0.08 of its potential returns per unit of risk. Akoustis Technologies is currently generating about -0.07 per unit of risk. If you would invest 1,056 in Celestica on September 7, 2023 and sell it today you would earn a total of 1,531 from holding Celestica or generate 144.98% return on investment over 90 days.
Compared to the overall equity markets, risk-adjusted returns on investments in Celestica are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating essential indicators, Celestica unveiled solid returns over the last few months and may actually be approaching a breakup point.
Over the last 90 days Akoustis Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2024. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.
Celestica and Akoustis Technologies Volatility Contrast
Predicted Return Density
Pair Trading with Celestica and Akoustis Technologies
The main advantage of trading using opposite Celestica and Akoustis Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Celestica position performs unexpectedly, Akoustis Technologies 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 Akoustis Technologies will offset losses from the drop in Akoustis Technologies' long position.
The idea behind Celestica and Akoustis Technologies 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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