Correlation Between Adm Tronics and Chembio Diagnostics

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

Diversification Opportunities for Adm Tronics and Chembio Diagnostics

-0.35
  Correlation Coefficient

Very good diversification

The 3 months correlation between Adm Tronics and Chembio is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Adm Tronics Unlimited and Chembio Diagnostics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chembio Diagnostics and Adm Tronics 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 Adm Tronics Unlimited are associated (or correlated) with Chembio Diagnostics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chembio Diagnostics has no effect on the direction of Adm Tronics i.e., Adm Tronics and Chembio Diagnostics go up and down completely randomly.

Pair Corralation between Adm Tronics and Chembio Diagnostics

Given the investment horizon of 90 days Adm Tronics Unlimited is expected to generate 0.9 times more return on investment than Chembio Diagnostics. However, Adm Tronics Unlimited is 1.12 times less risky than Chembio Diagnostics. It trades about 0.03 of its potential returns per unit of risk. Chembio Diagnostics is currently generating about -0.02 per unit of risk. If you would invest  11.00  in Adm Tronics Unlimited on July 2, 2022 and sell it today you would lose (4.00)  from holding Adm Tronics Unlimited or give up 36.36% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Adm Tronics Unlimited  vs.  Chembio Diagnostics

 Performance (%) 
       Timeline  
Adm Tronics Unlimited 
Adm Tronics Performance
4 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Adm Tronics Unlimited are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady primary indicators, Adm Tronics unveiled solid returns over the last few months and may actually be approaching a breakup point.

Adm Tronics Price Channel

Chembio Diagnostics 
Chembio Performance
0 of 100
Over the last 90 days Chembio Diagnostics has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's primary indicators remain nearly stable which may send shares a bit higher in October 2022. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Adm Tronics and Chembio Diagnostics Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Adm Tronics and Chembio Diagnostics

The main advantage of trading using opposite Adm Tronics and Chembio Diagnostics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Adm Tronics position performs unexpectedly, Chembio Diagnostics 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 Chembio Diagnostics will offset losses from the drop in Chembio Diagnostics' long position.
Adm Tronics vs. General Electric
The idea behind Adm Tronics Unlimited and Chembio Diagnostics 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.
The effect of pair diversification on risk is to reduce it, but we should note this doesn't apply to all risk types. When we trade pairs against Chembio Diagnostics as a counterpart, there is always some inherent risk that will never be diversified away no matter what. This volatility limits the effect of tactical diversification using pair trading. Chembio Diagnostics' systematic risk is the inherent uncertainty of the entire market, and therefore cannot be mitigated even by pair-trading it against the equity that is not highly correlated to it. On the other hand, Chembio Diagnostics' unsystematic risk describes the types of risk that we can protect against, at least to some degree, by selecting a matching pair that is not perfectly correlated to Chembio Diagnostics.
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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.

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