Correlation Between IONQ and Nortech Systems

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

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

Diversification Opportunities for IONQ and Nortech Systems

-0.61

Correlation Coefficient

IONQ  Nortech Systems

Excellent diversification

The 3 months correlation between IONQ and Nortech is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding IONQ Inc and Nortech Systems Incorporated in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nortech Systems and IONQ 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 IONQ Inc are associated (or correlated) with Nortech Systems. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nortech Systems has no effect on the direction of IONQ i.e., IONQ and Nortech Systems go up and down completely randomly.

Pair Corralation between IONQ and Nortech Systems

Given the investment horizon of 90 days IONQ Inc is expected to generate 3.18 times more return on investment than Nortech Systems. However, IONQ is 3.18 times more volatile than Nortech Systems Incorporated. It trades about 0.22 of its potential returns per unit of risk. Nortech Systems Incorporated is currently generating about 0.07 per unit of risk. If you would invest  3,221  in IONQ Inc on September 28, 2024 and sell it today you would earn a total of  1,375  from holding IONQ Inc or generate 42.69% return on investment over 90 days.

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

IONQ Inc  vs.  Nortech Systems Incorporated

IONQ Inc

Risk-Adjusted Performance

27 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in IONQ Inc are ranked lower than 27 (%) of all global equities and portfolios over the last 90 days. Even with relatively uncertain basic indicators, IONQ reported solid returns over the last few months and may actually be approaching a breakup point.

Nortech Systems

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nortech Systems Incorporated has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Nortech Systems is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with IONQ and Nortech Systems

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

The idea behind IONQ Inc and Nortech Systems Incorporated 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.