Correlation Between Nishoku Technology and Primax Electronics

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

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

Diversification Opportunities for Nishoku Technology and Primax Electronics

0.83

Correlation Coefficient

Nishoku Technology  Primax Electronics

Very poor diversification

The 3 months correlation between Nishoku and Primax is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Nishoku Technology and Primax Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Primax Electronics and Nishoku Technology 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 Nishoku Technology are associated (or correlated) with Primax Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Primax Electronics has no effect on the direction of Nishoku Technology i.e., Nishoku Technology and Primax Electronics go up and down completely randomly.

Pair Corralation between Nishoku Technology and Primax Electronics

Assuming the 90 days trading horizon Nishoku Technology is expected to generate 0.79 times more return on investment than Primax Electronics. However, Nishoku Technology is 1.27 times less risky than Primax Electronics. It trades about 0.08 of its potential returns per unit of risk. Primax Electronics is currently generating about 0.04 per unit of risk. If you would invest  11,000  in Nishoku Technology on December 4, 2024 and sell it today you would earn a total of  4,100  from holding Nishoku Technology or generate 37.27% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	99.59%
Values	Daily Returns

Nishoku Technology  vs.  Primax Electronics

Nishoku Technology

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Nishoku Technology are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Nishoku Technology showed solid returns over the last few months and may actually be approaching a breakup point.

Primax Electronics

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Primax Electronics are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Primax Electronics may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Nishoku Technology and Primax Electronics

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

The idea behind Nishoku Technology and Primax 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.