Correlation Between Giga Tronics and Metalink

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

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

Diversification Opportunities for Giga Tronics and Metalink

0.42

Correlation Coefficient

Giga Tronics  Metalink

Very weak diversification

The 3 months correlation between Giga and Metalink is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Giga tronics and Metalink in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Metalink and Giga Tronics 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 Giga tronics are associated (or correlated) with Metalink. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Metalink has no effect on the direction of Giga Tronics i.e., Giga Tronics and Metalink go up and down completely randomly.

Pair Corralation between Giga Tronics and Metalink

Given the investment horizon of 90 days Giga tronics is expected to generate 721.91 times more return on investment than Metalink. However, Giga Tronics is 721.91 times more volatile than Metalink. It trades about 0.23 of its potential returns per unit of risk. Metalink is currently generating about -0.19 per unit of risk. If you would invest  0.78  in Giga tronics on December 20, 2024 and sell it today you would lose (0.78) from holding Giga tronics or give up 100.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	18.64%
Values	Daily Returns

Giga tronics  vs.  Metalink

Giga tronics

Risk-Adjusted Performance

Solid

Over the last 90 days Giga tronics has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat conflicting technical and fundamental indicators, Giga Tronics sustained solid returns over the last few months and may actually be approaching a breakup point.

Metalink

Risk-Adjusted Performance

Very Weak

Over the last 90 days Metalink has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent essential indicators, Metalink is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Giga Tronics and Metalink

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

The idea behind Giga tronics and Metalink 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.