Correlation Between CTS and Neonode

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

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

Diversification Opportunities for CTS and Neonode

-0.15

Correlation Coefficient

CTS  Neonode

Good diversification

The 3 months correlation between CTS and Neonode is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding CTS Corp. and Neonode in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Neonode and CTS 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 CTS Corporation are associated (or correlated) with Neonode. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Neonode has no effect on the direction of CTS i.e., CTS and Neonode go up and down completely randomly.

Pair Corralation between CTS and Neonode

Considering the 90-day investment horizon CTS Corporation is expected to under-perform the Neonode. But the stock apears to be less risky and, when comparing its historical volatility, CTS Corporation is 2.3 times less risky than Neonode. The stock trades about -0.19 of its potential returns per unit of risk. The Neonode is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  830.00  in Neonode on December 24, 2024 and sell it today you would earn a total of  42.00  from holding Neonode or generate 5.06% return on investment over 90 days.

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

CTS Corp.  vs.  Neonode

CTS Corporation

Risk-Adjusted Performance

Very Weak

Over the last 90 days CTS Corporation has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Neonode

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Neonode are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very inconsistent basic indicators, Neonode may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with CTS and Neonode

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

The idea behind CTS Corporation and Neonode 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.