Correlation Between Chicago Rivet and Servotronics

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

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

Diversification Opportunities for Chicago Rivet and Servotronics

0.42

Correlation Coefficient

Chicago Rivet  Servotronics

Very weak diversification

The 3 months correlation between Chicago and Servotronics is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Chicago Rivet Machine and Servotronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Servotronics and Chicago Rivet 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 Chicago Rivet Machine are associated (or correlated) with Servotronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Servotronics has no effect on the direction of Chicago Rivet i.e., Chicago Rivet and Servotronics go up and down completely randomly.

Pair Corralation between Chicago Rivet and Servotronics

Considering the 90-day investment horizon Chicago Rivet Machine is expected to generate 1.01 times more return on investment than Servotronics. However, Chicago Rivet is 1.01 times more volatile than Servotronics. It trades about -0.02 of its potential returns per unit of risk. Servotronics is currently generating about -0.07 per unit of risk. If you would invest  1,889  in Chicago Rivet Machine on August 30, 2024 and sell it today you would lose (137.00) from holding Chicago Rivet Machine or give up 7.25% of portfolio value over 90 days.

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

Chicago Rivet Machine  vs.  Servotronics

Chicago Rivet Machine

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Chicago Rivet Machine has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Chicago Rivet is not utilizing all of its potentials. The newest stock price agitation, may contribute to short-term losses for the retail investors.

Servotronics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Servotronics has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in December 2024. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Chicago Rivet and Servotronics

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

The idea behind Chicago Rivet Machine and Servotronics 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.