Correlation Between Electro Sensors and Microvision

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

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

Diversification Opportunities for Electro Sensors and Microvision

0.11

Correlation Coefficient

Electro Sensors  Microvision

Average diversification

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

Pair Corralation between Electro Sensors and Microvision

Given the investment horizon of 90 days Electro Sensors is expected to under-perform the Microvision. But the stock apears to be less risky and, when comparing its historical volatility, Electro Sensors is 4.09 times less risky than Microvision. The stock trades about -0.08 of its potential returns per unit of risk. The Microvision is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  111.00  in Microvision on December 24, 2024 and sell it today you would earn a total of  37.00  from holding Microvision or generate 33.33% return on investment over 90 days.

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

Electro Sensors  vs.  Microvision

Electro Sensors

Risk-Adjusted Performance

Very Weak

Over the last 90 days Electro Sensors has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Microvision

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Microvision are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak forward indicators, Microvision unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Electro Sensors and Microvision

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

The idea behind Electro Sensors and Microvision 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.

Check out your portfolio center.

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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.