Correlation Between Frequency Electronics and ClearOne

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

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

Diversification Opportunities for Frequency Electronics and ClearOne

0.06

Correlation Coefficient

Frequency Electronics  ClearOne

Significant diversification

The 3 months correlation between Frequency and ClearOne is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Frequency Electronics and ClearOne in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ClearOne and Frequency Electronics 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 Frequency Electronics are associated (or correlated) with ClearOne. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ClearOne has no effect on the direction of Frequency Electronics i.e., Frequency Electronics and ClearOne go up and down completely randomly.

Pair Corralation between Frequency Electronics and ClearOne

Given the investment horizon of 90 days Frequency Electronics is expected to under-perform the ClearOne. But the stock apears to be less risky and, when comparing its historical volatility, Frequency Electronics is 3.37 times less risky than ClearOne. The stock trades about -0.08 of its potential returns per unit of risk. The ClearOne is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  63.00  in ClearOne on December 30, 2024 and sell it today you would lose (2.00) from holding ClearOne or give up 3.17% of portfolio value over 90 days.

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

Frequency Electronics  vs.  ClearOne

Frequency Electronics

Risk-Adjusted Performance

Very Weak

Over the last 90 days Frequency Electronics has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Stock's forward indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

ClearOne

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in ClearOne are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain basic indicators, ClearOne displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Frequency Electronics and ClearOne

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

The idea behind Frequency Electronics and ClearOne 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 Global Correlations module to find global opportunities by holding instruments from different markets.