Correlation Between Veeco Instruments and Ambow Education

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Can any of the company-specific risk be diversified away by investing in both Veeco Instruments and Ambow Education 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 Veeco Instruments and Ambow Education into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Veeco Instruments and Ambow Education Holding, you can compare the effects of market volatilities on Veeco Instruments and Ambow Education 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 Veeco Instruments with a short position of Ambow Education. Check out your portfolio center. Please also check ongoing floating volatility patterns of Veeco Instruments and Ambow Education.

Diversification Opportunities for Veeco Instruments and Ambow Education

0.15
  Correlation Coefficient

Average diversification

The 3 months correlation between Veeco and Ambow is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Veeco Instruments and Ambow Education Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ambow Education Holding and Veeco Instruments 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 Veeco Instruments are associated (or correlated) with Ambow Education. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ambow Education Holding has no effect on the direction of Veeco Instruments i.e., Veeco Instruments and Ambow Education go up and down completely randomly.

Pair Corralation between Veeco Instruments and Ambow Education

Given the investment horizon of 90 days Veeco Instruments is expected to generate 8.83 times less return on investment than Ambow Education. But when comparing it to its historical volatility, Veeco Instruments is 3.53 times less risky than Ambow Education. It trades about 0.02 of its potential returns per unit of risk. Ambow Education Holding is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  171.00  in Ambow Education Holding on January 29, 2024 and sell it today you would earn a total of  3.00  from holding Ambow Education Holding or generate 1.75% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Veeco Instruments  vs.  Ambow Education Holding

 Performance 
       Timeline  
Veeco Instruments 

Risk-Adjusted Performance

5 of 100

 
Weak
 
Strong
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in Veeco Instruments are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady fundamental indicators, Veeco Instruments may actually be approaching a critical reversion point that can send shares even higher in May 2024.
Ambow Education Holding 

Risk-Adjusted Performance

5 of 100

 
Weak
 
Strong
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in Ambow Education Holding are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain fundamental drivers, Ambow Education displayed solid returns over the last few months and may actually be approaching a breakup point.

Veeco Instruments and Ambow Education Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Veeco Instruments and Ambow Education

The main advantage of trading using opposite Veeco Instruments and Ambow Education positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Veeco Instruments position performs unexpectedly, Ambow Education 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 Ambow Education will offset losses from the drop in Ambow Education's long position.
The idea behind Veeco Instruments and Ambow Education Holding 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.

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