Can any of the company-specific risk be diversified away by investing in both Iteris 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 Iteris and Akoustis Technologies into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Iteris Inc and Akoustis Technologies, you can compare the effects of market volatilities on Iteris 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 Iteris with a short position of Akoustis Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Iteris and Akoustis Technologies.
Diversification Opportunities for Iteris and Akoustis Technologies
The 3 months correlation between Iteris and Akoustis is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Iteris Inc and Akoustis Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Akoustis Technologies and Iteris 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 Iteris Inc 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 Iteris i.e., Iteris and Akoustis Technologies go up and down completely randomly.
Pair Corralation between Iteris and Akoustis Technologies
Considering the 90-day investment horizon Iteris Inc is expected to under-perform the Akoustis Technologies. But the stock apears to be less risky and, when comparing its historical volatility, Iteris Inc is 3.24 times less risky than Akoustis Technologies. The stock trades about -0.08 of its potential returns per unit of risk. The Akoustis Technologies is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest 51.00 in Akoustis Technologies on September 1, 2023 and sell it today you would earn a total of 9.00 from holding Akoustis Technologies or generate 17.65% return on investment over 90 days.
Over the last 90 days Iteris Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unfluctuating performance, the Stock's basic indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.
Over the last 90 days Akoustis Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of conflicting performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in December 2023. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.
Iteris and Akoustis Technologies Volatility Contrast
Predicted Return Density
Pair Trading with Iteris and Akoustis Technologies
The main advantage of trading using opposite Iteris and Akoustis Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Iteris 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 Iteris Inc 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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