Correlation Between Edison Opto and Harvatek Corp

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

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

Diversification Opportunities for Edison Opto and Harvatek Corp

0.44

Correlation Coefficient

Edison Opto  Harvatek Corp

Very weak diversification

The 3 months correlation between Edison and Harvatek is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Edison Opto Corp and Harvatek Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Harvatek Corp and Edison Opto 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 Edison Opto Corp are associated (or correlated) with Harvatek Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Harvatek Corp has no effect on the direction of Edison Opto i.e., Edison Opto and Harvatek Corp go up and down completely randomly.

Pair Corralation between Edison Opto and Harvatek Corp

Assuming the 90 days trading horizon Edison Opto Corp is expected to generate 1.22 times more return on investment than Harvatek Corp. However, Edison Opto is 1.22 times more volatile than Harvatek Corp. It trades about 0.07 of its potential returns per unit of risk. Harvatek Corp is currently generating about -0.05 per unit of risk. If you would invest  2,415  in Edison Opto Corp on September 15, 2024 and sell it today you would earn a total of  225.00  from holding Edison Opto Corp or generate 9.32% return on investment over 90 days.

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

Edison Opto Corp  vs.  Harvatek Corp

Edison Opto Corp

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Edison Opto Corp are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Edison Opto may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Harvatek Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Harvatek 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.

Pair Trading with Edison Opto and Harvatek Corp

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

The idea behind Edison Opto Corp and Harvatek Corp 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.