Correlation Between Prime Electronics and Arcadyan Technology

Can any of the company-specific risk be diversified away by investing in both Prime Electronics and Arcadyan Technology 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 Arcadyan Technology 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 Arcadyan Technology Corp, you can compare the effects of market volatilities on Prime Electronics and Arcadyan Technology 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 Arcadyan Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Prime Electronics and Arcadyan Technology.

Diversification Opportunities for Prime Electronics and Arcadyan Technology

-0.43

Correlation Coefficient

Prime Electronics  Arcadyan Technology

Very good diversification

The 3 months correlation between Prime and Arcadyan is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Prime Electronics Satellitics and Arcadyan Technology Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arcadyan Technology Corp 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 Arcadyan Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arcadyan Technology Corp has no effect on the direction of Prime Electronics i.e., Prime Electronics and Arcadyan Technology go up and down completely randomly.

Pair Corralation between Prime Electronics and Arcadyan Technology

Assuming the 90 days trading horizon Prime Electronics Satellitics is expected to under-perform the Arcadyan Technology. But the stock apears to be less risky and, when comparing its historical volatility, Prime Electronics Satellitics is 1.23 times less risky than Arcadyan Technology. The stock trades about -0.07 of its potential returns per unit of risk. The Arcadyan Technology Corp is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  17,350  in Arcadyan Technology Corp on December 24, 2024 and sell it today you would earn a total of  4,800  from holding Arcadyan Technology Corp or generate 27.67% return on investment over 90 days.

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

Prime Electronics Satellitics  vs.  Arcadyan Technology Corp

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.

Arcadyan Technology Corp

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Arcadyan Technology Corp are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Arcadyan Technology showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Prime Electronics and Arcadyan Technology

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

The idea behind Prime Electronics Satellitics and Arcadyan Technology 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.