Correlation Between Electro Sensors and Know Labs

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

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

Diversification Opportunities for Electro Sensors and Know Labs

-0.79

Correlation Coefficient

Electro Sensors  Know Labs

Pay attention - limited upside

The 3 months correlation between Electro and Know is -0.79. Overlapping area represents the amount of risk that can be diversified away by holding Electro Sensors and Know Labs in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Know Labs 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 Know Labs. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Know Labs has no effect on the direction of Electro Sensors i.e., Electro Sensors and Know Labs go up and down completely randomly.

Pair Corralation between Electro Sensors and Know Labs

Given the investment horizon of 90 days Electro Sensors is expected to generate 0.28 times more return on investment than Know Labs. However, Electro Sensors is 3.62 times less risky than Know Labs. It trades about 0.03 of its potential returns per unit of risk. Know Labs is currently generating about -0.03 per unit of risk. If you would invest  428.00  in Electro Sensors on October 24, 2024 and sell it today you would earn a total of  86.25  from holding Electro Sensors or generate 20.15% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	92.71%
Values	Daily Returns

Electro Sensors  vs.  Know Labs

Electro Sensors

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Electro Sensors are ranked lower than 16 (%) 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.

Know Labs

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Know Labs 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 fairly stable which may send shares a bit higher in February 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 Know Labs

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

The idea behind Electro Sensors and Know Labs 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.