Correlation Between Foxconn Technology and Advanced Lithium

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

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

Diversification Opportunities for Foxconn Technology and Advanced Lithium

0.68

Correlation Coefficient

Foxconn Technology  Advanced Lithium

Poor diversification

The 3 months correlation between Foxconn and Advanced is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Foxconn Technology Co and Advanced Lithium Electrochemis in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Advanced Lithium Ele and Foxconn Technology 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 Foxconn Technology Co are associated (or correlated) with Advanced Lithium. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Advanced Lithium Ele has no effect on the direction of Foxconn Technology i.e., Foxconn Technology and Advanced Lithium go up and down completely randomly.

Pair Corralation between Foxconn Technology and Advanced Lithium

Assuming the 90 days trading horizon Foxconn Technology Co is expected to generate 0.95 times more return on investment than Advanced Lithium. However, Foxconn Technology Co is 1.05 times less risky than Advanced Lithium. It trades about -0.16 of its potential returns per unit of risk. Advanced Lithium Electrochemistry is currently generating about -0.2 per unit of risk. If you would invest  8,370  in Foxconn Technology Co on September 24, 2024 and sell it today you would lose (700.00) from holding Foxconn Technology Co or give up 8.36% of portfolio value over 90 days.

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

Foxconn Technology Co  vs.  Advanced Lithium Electrochemis

Foxconn Technology

Risk-Adjusted Performance

7 of 100

OK

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

Advanced Lithium Ele

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Advanced Lithium Electrochemistry are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Advanced Lithium showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Foxconn Technology and Advanced Lithium

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

The idea behind Foxconn Technology Co and Advanced Lithium Electrochemistry 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..