Correlation Between Interlink Electronics and Benchmark Electronics

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

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

Diversification Opportunities for Interlink Electronics and Benchmark Electronics

0.29

Correlation Coefficient

Interlink Electronics  Benchmark Electronics

Modest diversification

The 3 months correlation between Interlink and Benchmark is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Interlink Electronics and Benchmark Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Benchmark Electronics and Interlink 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 Interlink Electronics are associated (or correlated) with Benchmark Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Benchmark Electronics has no effect on the direction of Interlink Electronics i.e., Interlink Electronics and Benchmark Electronics go up and down completely randomly.

Pair Corralation between Interlink Electronics and Benchmark Electronics

Given the investment horizon of 90 days Interlink Electronics is expected to generate 3.29 times more return on investment than Benchmark Electronics. However, Interlink Electronics is 3.29 times more volatile than Benchmark Electronics. It trades about 0.03 of its potential returns per unit of risk. Benchmark Electronics is currently generating about -0.12 per unit of risk. If you would invest  654.00  in Interlink Electronics on December 30, 2024 and sell it today you would earn a total of  10.00  from holding Interlink Electronics or generate 1.53% return on investment over 90 days.

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

Interlink Electronics  vs.  Benchmark Electronics

Interlink Electronics

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Interlink Electronics are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite quite inconsistent basic indicators, Interlink Electronics disclosed solid returns over the last few months and may actually be approaching a breakup point.

Benchmark Electronics

Risk-Adjusted Performance

Very Weak

Over the last 90 days Benchmark Electronics has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's technical indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Interlink Electronics and Benchmark Electronics

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

The idea behind Interlink Electronics and Benchmark Electronics 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.