Correlation Between Frequency Electronics and Quantum

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

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

Diversification Opportunities for Frequency Electronics and Quantum

0.91

Correlation Coefficient

Frequency Electronics  Quantum

Almost no diversification

The 3 months correlation between Frequency and Quantum is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Frequency Electronics and Quantum in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Quantum 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 Quantum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Quantum has no effect on the direction of Frequency Electronics i.e., Frequency Electronics and Quantum go up and down completely randomly.

Pair Corralation between Frequency Electronics and Quantum

Given the investment horizon of 90 days Frequency Electronics is expected to generate 6.25 times less return on investment than Quantum. But when comparing it to its historical volatility, Frequency Electronics is 5.28 times less risky than Quantum. It trades about 0.26 of its potential returns per unit of risk. Quantum is currently generating about 0.3 of returns per unit of risk over similar time horizon. If you would invest  1,375  in Quantum on October 7, 2024 and sell it today you would earn a total of  4,068  from holding Quantum or generate 295.85% return on investment over 90 days.

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

Frequency Electronics  vs.  Quantum

Frequency Electronics

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Frequency Electronics are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of very inconsistent forward indicators, Frequency Electronics displayed solid returns over the last few months and may actually be approaching a breakup point.

Quantum

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Quantum are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of very weak fundamental indicators, Quantum displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Frequency Electronics and Quantum

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

The idea behind Frequency Electronics and Quantum 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.