Correlation Between Ingentec and Radiant Opto

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

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

Diversification Opportunities for Ingentec and Radiant Opto

0.28

Correlation Coefficient

Ingentec  Radiant Opto

Modest diversification

The 3 months correlation between Ingentec and Radiant is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Ingentec and Radiant Opto Electronics Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Radiant Opto Electro and Ingentec 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 Ingentec are associated (or correlated) with Radiant Opto. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Radiant Opto Electro has no effect on the direction of Ingentec i.e., Ingentec and Radiant Opto go up and down completely randomly.

Pair Corralation between Ingentec and Radiant Opto

Assuming the 90 days trading horizon Ingentec is expected to under-perform the Radiant Opto. In addition to that, Ingentec is 1.24 times more volatile than Radiant Opto Electronics Corp. It trades about -0.25 of its total potential returns per unit of risk. Radiant Opto Electronics Corp is currently generating about 0.04 per unit of volatility. If you would invest  19,250  in Radiant Opto Electronics Corp on September 22, 2024 and sell it today you would earn a total of  650.00  from holding Radiant Opto Electronics Corp or generate 3.38% return on investment over 90 days.

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

Ingentec  vs.  Radiant Opto Electronics Corp

Ingentec

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ingentec 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.

Radiant Opto Electro

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Radiant Opto Electronics Corp are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Radiant Opto 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 Ingentec and Radiant Opto

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

The idea behind Ingentec and Radiant Opto Electronics 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.