Correlation Between Nortech Systems and Kewaunee Scientific

Can any of the company-specific risk be diversified away by investing in both Nortech Systems and Kewaunee Scientific 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 Kewaunee Scientific 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 Kewaunee Scientific, you can compare the effects of market volatilities on Nortech Systems and Kewaunee Scientific 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 Kewaunee Scientific. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nortech Systems and Kewaunee Scientific.

Diversification Opportunities for Nortech Systems and Kewaunee Scientific

-0.59

Correlation Coefficient

Nortech Systems  Kewaunee Scientific

Excellent diversification

The 3 months correlation between Nortech and Kewaunee is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding Nortech Systems Incorporated and Kewaunee Scientific in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kewaunee Scientific 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 Kewaunee Scientific. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kewaunee Scientific has no effect on the direction of Nortech Systems i.e., Nortech Systems and Kewaunee Scientific go up and down completely randomly.

Pair Corralation between Nortech Systems and Kewaunee Scientific

Given the investment horizon of 90 days Nortech Systems is expected to generate 6.54 times less return on investment than Kewaunee Scientific. But when comparing it to its historical volatility, Nortech Systems Incorporated is 1.06 times less risky than Kewaunee Scientific. It trades about 0.01 of its potential returns per unit of risk. Kewaunee Scientific is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  1,550  in Kewaunee Scientific on December 4, 2024 and sell it today you would earn a total of  3,672  from holding Kewaunee Scientific or generate 236.9% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	95.77%
Values	Daily Returns

Nortech Systems Incorporated  vs.  Kewaunee Scientific

Nortech Systems

Risk-Adjusted Performance

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 latest unsteady performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Kewaunee Scientific

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Kewaunee Scientific are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Kewaunee Scientific unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Nortech Systems and Kewaunee Scientific

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

The idea behind Nortech Systems Incorporated and Kewaunee Scientific 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.