Correlation Between CompoSecure and Syntec Optics

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

By analyzing existing cross correlation between CompoSecure and Syntec Optics Holdings, you can compare the effects of market volatilities on CompoSecure and Syntec Optics 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 CompoSecure with a short position of Syntec Optics. Check out your portfolio center. Please also check ongoing floating volatility patterns of CompoSecure and Syntec Optics.

Diversification Opportunities for CompoSecure and Syntec Optics

0.11

Correlation Coefficient

CompoSecure  Syntec Optics

Average diversification

The 3 months correlation between CompoSecure and Syntec is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding CompoSecure and Syntec Optics Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Syntec Optics Holdings and CompoSecure 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 CompoSecure are associated (or correlated) with Syntec Optics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Syntec Optics Holdings has no effect on the direction of CompoSecure i.e., CompoSecure and Syntec Optics go up and down completely randomly.

Pair Corralation between CompoSecure and Syntec Optics

Assuming the 90 days horizon CompoSecure is expected to under-perform the Syntec Optics. But the stock apears to be less risky and, when comparing its historical volatility, CompoSecure is 13.57 times less risky than Syntec Optics. The stock trades about -0.21 of its potential returns per unit of risk. The Syntec Optics Holdings is currently generating about 0.27 of returns per unit of risk over similar time horizon. If you would invest  94.00  in Syntec Optics Holdings on October 5, 2024 and sell it today you would earn a total of  158.00  from holding Syntec Optics Holdings or generate 168.09% return on investment over 90 days.

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

CompoSecure  vs.  Syntec Optics Holdings

CompoSecure

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in CompoSecure are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, CompoSecure showed solid returns over the last few months and may actually be approaching a breakup point.

Syntec Optics Holdings

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Syntec Optics Holdings are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, Syntec Optics showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CompoSecure and Syntec Optics

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

The idea behind CompoSecure and Syntec Optics Holdings 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .