Correlation Between Ambarella and Sumco Corp

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

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

Diversification Opportunities for Ambarella and Sumco Corp

0.25

Correlation Coefficient

Ambarella  Sumco Corp

Modest diversification

The 3 months correlation between Ambarella and Sumco is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Ambarella and Sumco Corp ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sumco Corp ADR and Ambarella 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 Ambarella are associated (or correlated) with Sumco Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sumco Corp ADR has no effect on the direction of Ambarella i.e., Ambarella and Sumco Corp go up and down completely randomly.

Pair Corralation between Ambarella and Sumco Corp

Given the investment horizon of 90 days Ambarella is expected to generate 1.52 times more return on investment than Sumco Corp. However, Ambarella is 1.52 times more volatile than Sumco Corp ADR. It trades about 0.03 of its potential returns per unit of risk. Sumco Corp ADR is currently generating about -0.07 per unit of risk. If you would invest  5,685  in Ambarella on March 4, 2024 and sell it today you would earn a total of  141.00  from holding Ambarella or generate 2.48% return on investment over 90 days.

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

Ambarella  vs.  Sumco Corp ADR

Ambarella

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Ambarella are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong fundamental drivers, Ambarella is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Sumco Corp ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sumco Corp ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest inconsistent performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Ambarella and Sumco Corp

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

The idea behind Ambarella and Sumco Corp ADR 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.

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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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..