Correlation Between Ritek Corp and Microelectronics

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

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

Diversification Opportunities for Ritek Corp and Microelectronics

-0.26

Correlation Coefficient

Ritek Corp  Microelectronics

Very good diversification

The 3 months correlation between Ritek and Microelectronics is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Ritek Corp and Microelectronics Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Microelectronics Tec and Ritek 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 Ritek Corp are associated (or correlated) with Microelectronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Microelectronics Tec has no effect on the direction of Ritek Corp i.e., Ritek Corp and Microelectronics go up and down completely randomly.

Pair Corralation between Ritek Corp and Microelectronics

Assuming the 90 days trading horizon Ritek Corp is expected to under-perform the Microelectronics. In addition to that, Ritek Corp is 1.01 times more volatile than Microelectronics Technology. It trades about -0.08 of its total potential returns per unit of risk. Microelectronics Technology is currently generating about 0.02 per unit of volatility. If you would invest  2,970  in Microelectronics Technology on September 17, 2024 and sell it today you would earn a total of  60.00  from holding Microelectronics Technology or generate 2.02% return on investment over 90 days.

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

Ritek Corp  vs.  Microelectronics Technology

Ritek Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ritek Corp 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.

Microelectronics Tec

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Microelectronics Technology are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Microelectronics is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Ritek Corp and Microelectronics

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

The idea behind Ritek Corp and Microelectronics Technology 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.