Correlation Between Prime Electronics and Hitron Technologies

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

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

Diversification Opportunities for Prime Electronics and Hitron Technologies

0.86

Correlation Coefficient

Prime Electronics  Hitron Technologies

Very poor diversification

The 3 months correlation between Prime and Hitron is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Prime Electronics Satellitics and Hitron Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hitron Technologies and Prime 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 Prime Electronics Satellitics are associated (or correlated) with Hitron Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hitron Technologies has no effect on the direction of Prime Electronics i.e., Prime Electronics and Hitron Technologies go up and down completely randomly.

Pair Corralation between Prime Electronics and Hitron Technologies

Assuming the 90 days trading horizon Prime Electronics Satellitics is expected to generate 1.29 times more return on investment than Hitron Technologies. However, Prime Electronics is 1.29 times more volatile than Hitron Technologies. It trades about -0.08 of its potential returns per unit of risk. Hitron Technologies is currently generating about -0.17 per unit of risk. If you would invest  1,295  in Prime Electronics Satellitics on December 23, 2024 and sell it today you would lose (125.00) from holding Prime Electronics Satellitics or give up 9.65% of portfolio value over 90 days.

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

Prime Electronics Satellitics  vs.  Hitron Technologies

Prime Electronics

Risk-Adjusted Performance

Very Weak

Over the last 90 days Prime Electronics Satellitics 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.

Hitron Technologies

Risk-Adjusted Performance

Very Weak

Over the last 90 days Hitron Technologies 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 April 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Prime Electronics and Hitron Technologies

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

The idea behind Prime Electronics Satellitics and Hitron Technologies 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 Global Correlations module to find global opportunities by holding instruments from different markets.