Correlation Between Action Electronics and CyberTAN Technology

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

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

Diversification Opportunities for Action Electronics and CyberTAN Technology

-0.16

Correlation Coefficient

Action Electronics  CyberTAN Technology

Good diversification

The 3 months correlation between Action and CyberTAN is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Action Electronics Co and CyberTAN Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CyberTAN Technology and Action Electronics 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 Action Electronics Co are associated (or correlated) with CyberTAN Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CyberTAN Technology has no effect on the direction of Action Electronics i.e., Action Electronics and CyberTAN Technology go up and down completely randomly.

Pair Corralation between Action Electronics and CyberTAN Technology

Assuming the 90 days trading horizon Action Electronics is expected to generate 1.01 times less return on investment than CyberTAN Technology. But when comparing it to its historical volatility, Action Electronics Co is 1.17 times less risky than CyberTAN Technology. It trades about 0.04 of its potential returns per unit of risk. CyberTAN Technology is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  2,425  in CyberTAN Technology on October 22, 2024 and sell it today you would earn a total of  610.00  from holding CyberTAN Technology or generate 25.15% return on investment over 90 days.

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

Action Electronics Co  vs.  CyberTAN Technology

Action Electronics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Action Electronics Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Action Electronics is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

CyberTAN Technology

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CyberTAN Technology 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.

Pair Trading with Action Electronics and CyberTAN Technology

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

The idea behind Action Electronics Co and CyberTAN 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.

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 the Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.