Correlation Between Edgewater Wireless and NamSys

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

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

Diversification Opportunities for Edgewater Wireless and NamSys

0.53

Correlation Coefficient

Edgewater Wireless  NamSys

Very weak diversification

The 3 months correlation between Edgewater and NamSys is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Edgewater Wireless Systems and NamSys Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NamSys Inc and Edgewater Wireless 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 Edgewater Wireless Systems are associated (or correlated) with NamSys. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NamSys Inc has no effect on the direction of Edgewater Wireless i.e., Edgewater Wireless and NamSys go up and down completely randomly.

Pair Corralation between Edgewater Wireless and NamSys

Assuming the 90 days horizon Edgewater Wireless Systems is expected to generate 4.14 times more return on investment than NamSys. However, Edgewater Wireless is 4.14 times more volatile than NamSys Inc. It trades about 0.13 of its potential returns per unit of risk. NamSys Inc is currently generating about -0.01 per unit of risk. If you would invest  2.83  in Edgewater Wireless Systems on October 24, 2024 and sell it today you would earn a total of  1.87  from holding Edgewater Wireless Systems or generate 66.08% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.36%
Values	Daily Returns

Edgewater Wireless Systems  vs.  NamSys Inc

Edgewater Wireless

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Edgewater Wireless Systems are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, Edgewater Wireless reported solid returns over the last few months and may actually be approaching a breakup point.

NamSys Inc

Risk-Adjusted Performance

0 of 100

Insignificant

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

Pair Trading with Edgewater Wireless and NamSys

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

The idea behind Edgewater Wireless Systems and NamSys Inc 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.