Can any of the company-specific risk be diversified away by investing in both Flux Power and Amprius 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 Flux Power and Amprius Technologies into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Flux Power Holdings and Amprius Technologies, you can compare the effects of market volatilities on Flux Power and Amprius 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 Flux Power with a short position of Amprius Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Flux Power and Amprius Technologies.
Diversification Opportunities for Flux Power and Amprius Technologies
The 3 months correlation between Flux and Amprius is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Flux Power Holdings and Amprius Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amprius Technologies and Flux Power 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 Flux Power Holdings are associated (or correlated) with Amprius Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Amprius Technologies has no effect on the direction of Flux Power i.e., Flux Power and Amprius Technologies go up and down completely randomly.
Pair Corralation between Flux Power and Amprius Technologies
Given the investment horizon of 90 days Flux Power Holdings is expected to under-perform the Amprius Technologies. But the stock apears to be less risky and, when comparing its historical volatility, Flux Power Holdings is 1.66 times less risky than Amprius Technologies. The stock trades about -0.05 of its potential returns per unit of risk. The Amprius Technologies is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 453.00 in Amprius Technologies on June 27, 2023 and sell it today you would lose (18.00) from holding Amprius Technologies or give up 3.97% of portfolio value over 90 days.
Compared to the overall equity markets, risk-adjusted returns on investments in Flux Power Holdings are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady basic indicators, Flux Power may actually be approaching a critical reversion point that can send shares even higher in October 2023.
Over the last 90 days Amprius 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 fairly strong which may send shares a bit higher in October 2023. The current disturbance may also be a sign of long term up-swing for the company investors.
Flux Power and Amprius Technologies Volatility Contrast
Predicted Return Density
Pair Trading with Flux Power and Amprius Technologies
The main advantage of trading using opposite Flux Power and Amprius Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Flux Power position performs unexpectedly, Amprius 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 Amprius Technologies will offset losses from the drop in Amprius Technologies' long position.
The idea behind Flux Power Holdings and Amprius 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..
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