Correlation Between Imageware Sys and On4 Communications

Can any of the company-specific risk be diversified away by investing in both Imageware Sys and On4 Communications 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 Imageware Sys and On4 Communications into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Imageware Sys and On4 Communications, you can compare the effects of market volatilities on Imageware Sys and On4 Communications 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 Imageware Sys with a short position of On4 Communications. Check out your portfolio center. Please also check ongoing floating volatility patterns of Imageware Sys and On4 Communications.

Diversification Opportunities for Imageware Sys and On4 Communications

-0.16

Correlation Coefficient

Imageware Sys  On4 Communications

Good diversification

The 3 months correlation between Imageware and On4 is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Imageware Sys and On4 Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on On4 Communications and Imageware Sys 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 Imageware Sys are associated (or correlated) with On4 Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of On4 Communications has no effect on the direction of Imageware Sys i.e., Imageware Sys and On4 Communications go up and down completely randomly.

Pair Corralation between Imageware Sys and On4 Communications

If you would invest  0.01  in On4 Communications on September 14, 2024 and sell it today you would earn a total of  0.01  from holding On4 Communications or generate 100.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	1.59%
Values	Daily Returns

Imageware Sys  vs.  On4 Communications

Imageware Sys

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Imageware Sys has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Imageware Sys is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

On4 Communications

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in On4 Communications are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite fairly unfluctuating fundamental indicators, On4 Communications demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Imageware Sys and On4 Communications

The main advantage of trading using opposite Imageware Sys and On4 Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Imageware Sys position performs unexpectedly, On4 Communications 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 On4 Communications will offset losses from the drop in On4 Communications' long position.

The idea behind Imageware Sys and On4 Communications 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.