Correlation Between Metalink and Giga Tronics

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

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

Diversification Opportunities for Metalink and Giga Tronics

0.42

Correlation Coefficient

Metalink  Giga Tronics

Very weak diversification

The 3 months correlation between Metalink and Giga is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Metalink and Giga tronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Giga tronics and Metalink 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 Metalink are associated (or correlated) with Giga Tronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Giga tronics has no effect on the direction of Metalink i.e., Metalink and Giga Tronics go up and down completely randomly.

Pair Corralation between Metalink and Giga Tronics

Given the investment horizon of 90 days Metalink is expected to under-perform the Giga Tronics. But the pink sheet apears to be less risky and, when comparing its historical volatility, Metalink is 721.91 times less risky than Giga Tronics. The pink sheet trades about -0.19 of its potential returns per unit of risk. The Giga tronics is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest  0.78  in Giga tronics on December 20, 2024 and sell it today you would lose (0.78) from holding Giga tronics or give up 100.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	18.64%
Values	Daily Returns

Metalink  vs.  Giga tronics

Metalink

Risk-Adjusted Performance

Very Weak

Over the last 90 days Metalink has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent essential indicators, Metalink is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Giga tronics

Risk-Adjusted Performance

Solid

Over the last 90 days Giga tronics has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat conflicting technical and fundamental indicators, Giga Tronics sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Metalink and Giga Tronics

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

The idea behind Metalink and Giga tronics 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.

Check out your portfolio center.

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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.