Correlation Between Radiant Opto and Coxon Precise

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

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

Diversification Opportunities for Radiant Opto and Coxon Precise

0.44

Correlation Coefficient

Radiant Opto  Coxon Precise

Very weak diversification

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

Pair Corralation between Radiant Opto and Coxon Precise

Assuming the 90 days trading horizon Radiant Opto Electronics Corp is expected to generate 0.76 times more return on investment than Coxon Precise. However, Radiant Opto Electronics Corp is 1.32 times less risky than Coxon Precise. It trades about 0.08 of its potential returns per unit of risk. Coxon Precise Industrial is currently generating about 0.05 per unit of risk. If you would invest  10,550  in Radiant Opto Electronics Corp on September 24, 2024 and sell it today you would earn a total of  9,350  from holding Radiant Opto Electronics Corp or generate 88.63% return on investment over 90 days.

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

Radiant Opto Electronics Corp  vs.  Coxon Precise Industrial

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.

Coxon Precise Industrial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Coxon Precise Industrial 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.

Pair Trading with Radiant Opto and Coxon Precise

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

The idea behind Radiant Opto Electronics Corp and Coxon Precise Industrial 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.