Correlation Between Nortech Systems and Bone Biologics

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

By analyzing existing cross correlation between Nortech Systems Incorporated and Bone Biologics Corp, you can compare the effects of market volatilities on Nortech Systems and Bone Biologics 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 Nortech Systems with a short position of Bone Biologics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nortech Systems and Bone Biologics.

Diversification Opportunities for Nortech Systems and Bone Biologics

0.7

Correlation Coefficient

Nortech Systems  Bone Biologics

Poor diversification

The 3 months correlation between Nortech and Bone is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Nortech Systems Incorporated and Bone Biologics Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bone Biologics Corp and Nortech Systems 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 Nortech Systems Incorporated are associated (or correlated) with Bone Biologics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bone Biologics Corp has no effect on the direction of Nortech Systems i.e., Nortech Systems and Bone Biologics go up and down completely randomly.

Pair Corralation between Nortech Systems and Bone Biologics

Given the investment horizon of 90 days Nortech Systems Incorporated is expected to generate 0.5 times more return on investment than Bone Biologics. However, Nortech Systems Incorporated is 2.02 times less risky than Bone Biologics. It trades about -0.1 of its potential returns per unit of risk. Bone Biologics Corp is currently generating about -0.06 per unit of risk. If you would invest  1,249  in Nortech Systems Incorporated on October 15, 2024 and sell it today you would lose (251.00) from holding Nortech Systems Incorporated or give up 20.1% of portfolio value over 90 days.

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

Nortech Systems Incorporated  vs.  Bone Biologics Corp

Nortech Systems

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nortech Systems Incorporated has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Bone Biologics Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bone Biologics Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's essential indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Nortech Systems and Bone Biologics

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

The idea behind Nortech Systems Incorporated and Bone Biologics Corp 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.