Correlation Between McGrath RentCorp and Precision Optics,

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

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

Diversification Opportunities for McGrath RentCorp and Precision Optics,

0.35

Correlation Coefficient

McGrath RentCorp  Precision Optics,

Weak diversification

The 3 months correlation between McGrath and Precision is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding McGrath RentCorp and Precision Optics, in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Precision Optics, and McGrath RentCorp 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 McGrath RentCorp are associated (or correlated) with Precision Optics,. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Precision Optics, has no effect on the direction of McGrath RentCorp i.e., McGrath RentCorp and Precision Optics, go up and down completely randomly.

Pair Corralation between McGrath RentCorp and Precision Optics,

Given the investment horizon of 90 days McGrath RentCorp is expected to generate 4.42 times less return on investment than Precision Optics,. But when comparing it to its historical volatility, McGrath RentCorp is 2.68 times less risky than Precision Optics,. It trades about 0.09 of its potential returns per unit of risk. Precision Optics, is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  386.00  in Precision Optics, on October 26, 2024 and sell it today you would earn a total of  128.00  from holding Precision Optics, or generate 33.16% return on investment over 90 days.

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

McGrath RentCorp  vs.  Precision Optics,

McGrath RentCorp

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in McGrath RentCorp are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile basic indicators, McGrath RentCorp may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Precision Optics,

Risk-Adjusted Performance

11 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Precision Optics, are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite fairly unsteady fundamental indicators, Precision Optics, demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with McGrath RentCorp and Precision Optics,

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

The idea behind McGrath RentCorp and Precision Optics, 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.