Correlation Between Arima Communications and Jentech Precision

Can any of the company-specific risk be diversified away by investing in both Arima Communications and Jentech Precision 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 Arima Communications and Jentech Precision into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for Arima Communications and Jentech Precision

0.24

Correlation Coefficient

Arima Communications  Jentech Precision

Modest diversification

The 3 months correlation between Arima and Jentech is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Arima Communications Corp and Jentech Precision Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jentech Precision and Arima Communications 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 Arima Communications Corp are associated (or correlated) with Jentech Precision. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jentech Precision has no effect on the direction of Arima Communications i.e., Arima Communications and Jentech Precision go up and down completely randomly.

Pair Corralation between Arima Communications and Jentech Precision

Assuming the 90 days trading horizon Arima Communications Corp is expected to under-perform the Jentech Precision. In addition to that, Arima Communications is 1.38 times more volatile than Jentech Precision Industrial. It trades about -0.06 of its total potential returns per unit of risk. Jentech Precision Industrial is currently generating about -0.01 per unit of volatility. If you would invest  143,000  in Jentech Precision Industrial on December 2, 2024 and sell it today you would lose (9,000) from holding Jentech Precision Industrial or give up 6.29% of portfolio value over 90 days.

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

Arima Communications Corp  vs.  Jentech Precision Industrial

Arima Communications Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Arima Communications 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 April 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Jentech Precision

Risk-Adjusted Performance

Very Weak

Over the last 90 days Jentech Precision Industrial has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Jentech Precision is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Arima Communications and Jentech Precision

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

The idea behind Arima Communications Corp and Jentech Precision 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.