Correlation Between Radiant Opto and Primax Electronics

Can any of the company-specific risk be diversified away by investing in both Radiant Opto 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 Radiant Opto and Primax Electronics 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 Primax Electronics, you can compare the effects of market volatilities on Radiant Opto 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 Radiant Opto with a short position of Primax Electronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Radiant Opto and Primax Electronics.

Diversification Opportunities for Radiant Opto and Primax Electronics

0.29

Correlation Coefficient

Radiant Opto  Primax Electronics

Modest diversification

The 3 months correlation between Radiant and Primax is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Radiant Opto Electronics Corp and Primax Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Primax Electronics 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 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 Radiant Opto i.e., Radiant Opto and Primax Electronics go up and down completely randomly.

Pair Corralation between Radiant Opto and Primax Electronics

Assuming the 90 days trading horizon Radiant Opto Electronics Corp is expected to under-perform the Primax Electronics. But the stock apears to be less risky and, when comparing its historical volatility, Radiant Opto Electronics Corp is 1.35 times less risky than Primax Electronics. The stock trades about -0.04 of its potential returns per unit of risk. The Primax Electronics is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  7,930  in Primax Electronics on September 14, 2024 and sell it today you would lose (50.00) from holding Primax Electronics or give up 0.63% of portfolio value over 90 days.

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

Radiant Opto Electronics Corp  vs.  Primax Electronics

Radiant Opto Electro

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Radiant Opto Electronics Corp has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

Primax Electronics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Primax Electronics 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.

Pair Trading with Radiant Opto and Primax Electronics

The main advantage of trading using opposite Radiant Opto and Primax Electronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Radiant Opto 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 Radiant Opto Electronics Corp 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..