Correlation Between Materials Analysis and New Era

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

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

Diversification Opportunities for Materials Analysis and New Era

0.72

Correlation Coefficient

Materials Analysis  New Era

Poor diversification

The 3 months correlation between Materials and New is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Materials Analysis Technology and New Era Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on New Era Electronics and Materials Analysis 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 Materials Analysis Technology are associated (or correlated) with New Era. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of New Era Electronics has no effect on the direction of Materials Analysis i.e., Materials Analysis and New Era go up and down completely randomly.

Pair Corralation between Materials Analysis and New Era

Assuming the 90 days trading horizon Materials Analysis Technology is expected to under-perform the New Era. But the stock apears to be less risky and, when comparing its historical volatility, Materials Analysis Technology is 2.67 times less risky than New Era. The stock trades about -0.19 of its potential returns per unit of risk. The New Era Electronics is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  11,800  in New Era Electronics on September 24, 2024 and sell it today you would lose (50.00) from holding New Era Electronics or give up 0.42% of portfolio value over 90 days.

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

Materials Analysis Technology  vs.  New Era Electronics

Materials Analysis

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Materials Analysis Technology 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.

New Era Electronics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days New Era Electronics 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 January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Materials Analysis and New Era

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

The idea behind Materials Analysis Technology and New Era Electronics 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.