Correlation Between Automata and KEY

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

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

Diversification Opportunities for Automata and KEY

0.49

Correlation Coefficient

Automata  KEY

Very weak diversification

The 3 months correlation between Automata and KEY is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Automata and KEY in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KEY and Automata 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 Automata are associated (or correlated) with KEY. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KEY has no effect on the direction of Automata i.e., Automata and KEY go up and down completely randomly.

Pair Corralation between Automata and KEY

Assuming the 90 days trading horizon Automata is expected to generate 1.76 times less return on investment than KEY. But when comparing it to its historical volatility, Automata is 1.36 times less risky than KEY. It trades about 0.04 of its potential returns per unit of risk. KEY is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  0.30  in KEY on February 7, 2024 and sell it today you would earn a total of  0.41  from holding KEY or generate 135.2% return on investment over 90 days.

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

Automata  vs.  KEY

Automata

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Automata are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Automata exhibited solid returns over the last few months and may actually be approaching a breakup point.

KEY

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in KEY are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, KEY exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Automata and KEY

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

The idea behind Automata and KEY 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.