Correlation Between Onano Industrial and Para Light

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

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

Diversification Opportunities for Onano Industrial and Para Light

0.76

Correlation Coefficient

Onano Industrial  Para Light

Poor diversification

The 3 months correlation between Onano and Para is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Onano Industrial Corp and Para Light Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Para Light Electronics and Onano Industrial 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 Onano Industrial Corp are associated (or correlated) with Para Light. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Para Light Electronics has no effect on the direction of Onano Industrial i.e., Onano Industrial and Para Light go up and down completely randomly.

Pair Corralation between Onano Industrial and Para Light

Assuming the 90 days trading horizon Onano Industrial Corp is expected to generate 1.64 times more return on investment than Para Light. However, Onano Industrial is 1.64 times more volatile than Para Light Electronics. It trades about 0.05 of its potential returns per unit of risk. Para Light Electronics is currently generating about -0.02 per unit of risk. If you would invest  2,150  in Onano Industrial Corp on September 29, 2024 and sell it today you would earn a total of  1,140  from holding Onano Industrial Corp or generate 53.02% return on investment over 90 days.

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

Onano Industrial Corp  vs.  Para Light Electronics

Onano Industrial Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Onano Industrial Corp 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.

Para Light Electronics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Para Light 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 Onano Industrial and Para Light

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

The idea behind Onano Industrial Corp and Para Light 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.