Correlation Between General Interface and Para Light

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

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

Diversification Opportunities for General Interface and Para Light

0.86

Correlation Coefficient

General Interface  Para Light

Very poor diversification

The 3 months correlation between General and Para is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding General Interface Solution 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 General Interface 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 General Interface Solution 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 General Interface i.e., General Interface and Para Light go up and down completely randomly.

Pair Corralation between General Interface and Para Light

Assuming the 90 days trading horizon General Interface Solution is expected to generate 1.59 times more return on investment than Para Light. However, General Interface is 1.59 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 -0.26 per unit of risk. If you would invest  4,990  in General Interface Solution on October 9, 2024 and sell it today you would lose (125.00) from holding General Interface Solution or give up 2.51% of portfolio value over 90 days.

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

General Interface Solution  vs.  Para Light Electronics

General Interface

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days General Interface Solution 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 February 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 General Interface and Para Light

The main advantage of trading using opposite General Interface and Para Light positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if General Interface 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 General Interface Solution 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.