Correlation Between Electro Sensors and Focus Universal

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

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

Diversification Opportunities for Electro Sensors and Focus Universal

-0.26

Correlation Coefficient

Electro Sensors  Focus Universal

Very good diversification

The 3 months correlation between Electro and Focus is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Electro Sensors and Focus Universal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Focus Universal and Electro Sensors 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 Electro Sensors are associated (or correlated) with Focus Universal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Focus Universal has no effect on the direction of Electro Sensors i.e., Electro Sensors and Focus Universal go up and down completely randomly.

Pair Corralation between Electro Sensors and Focus Universal

Given the investment horizon of 90 days Electro Sensors is expected to generate 0.3 times more return on investment than Focus Universal. However, Electro Sensors is 3.37 times less risky than Focus Universal. It trades about 0.11 of its potential returns per unit of risk. Focus Universal is currently generating about -0.1 per unit of risk. If you would invest  390.00  in Electro Sensors on September 13, 2024 and sell it today you would earn a total of  52.00  from holding Electro Sensors or generate 13.33% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	92.06%
Values	Daily Returns

Electro Sensors  vs.  Focus Universal

Electro Sensors

Risk-Adjusted Performance

8 of 100

Modest

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

Focus Universal

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Focus Universal 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 fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Electro Sensors and Focus Universal

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

The idea behind Electro Sensors and Focus Universal 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.