Correlation Between Optotech Corp and I Chiun

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

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

Diversification Opportunities for Optotech Corp and I Chiun

0.85

Correlation Coefficient

Optotech Corp  I Chiun

Very poor diversification

The 3 months correlation between Optotech and 2486 is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Optotech Corp and I Chiun Precision Industry in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on I Chiun Precision and Optotech Corp 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 Optotech Corp are associated (or correlated) with I Chiun. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of I Chiun Precision has no effect on the direction of Optotech Corp i.e., Optotech Corp and I Chiun go up and down completely randomly.

Pair Corralation between Optotech Corp and I Chiun

Assuming the 90 days trading horizon Optotech Corp is expected to under-perform the I Chiun. But the stock apears to be less risky and, when comparing its historical volatility, Optotech Corp is 1.04 times less risky than I Chiun. The stock trades about -0.1 of its potential returns per unit of risk. The I Chiun Precision Industry is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  10,400  in I Chiun Precision Industry on October 20, 2024 and sell it today you would lose (50.00) from holding I Chiun Precision Industry or give up 0.48% of portfolio value over 90 days.

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

Optotech Corp  vs.  I Chiun Precision Industry

Optotech Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Optotech Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in February 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

I Chiun Precision

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days I Chiun Precision Industry has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Pair Trading with Optotech Corp and I Chiun

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

The idea behind Optotech Corp and I Chiun Precision Industry 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.