Correlation Between N Citron and Wave Electronics

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

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

Diversification Opportunities for N Citron and Wave Electronics

0.81

Correlation Coefficient

N Citron  Wave Electronics

Very poor diversification

The 3 months correlation between 101400 and Wave is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding N Citron and Wave Electronics Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wave Electronics and N Citron 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 N Citron are associated (or correlated) with Wave Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wave Electronics has no effect on the direction of N Citron i.e., N Citron and Wave Electronics go up and down completely randomly.

Pair Corralation between N Citron and Wave Electronics

Assuming the 90 days trading horizon N Citron is expected to generate 0.61 times more return on investment than Wave Electronics. However, N Citron is 1.63 times less risky than Wave Electronics. It trades about -0.11 of its potential returns per unit of risk. Wave Electronics Co is currently generating about -0.13 per unit of risk. If you would invest  45,300  in N Citron on September 4, 2024 and sell it today you would lose (5,300) from holding N Citron or give up 11.7% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.31%
Values	Daily Returns

N Citron  vs.  Wave Electronics Co

N Citron

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days N Citron has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak 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.

Wave Electronics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Wave Electronics Co 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 basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with N Citron and Wave Electronics

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

The idea behind N Citron and Wave Electronics Co 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.