Correlation Between Nortech Systems and SPDR Nuveen

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

Diversification Opportunities for Nortech Systems and SPDR Nuveen

-0.21

Correlation Coefficient

Nortech Systems  SPDR Nuveen

Very good diversification

The 3 months correlation between Nortech and SPDR is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding Nortech Systems Incorporated and SPDR Nuveen Municipal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR Nuveen Municipal 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 SPDR Nuveen. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR Nuveen Municipal has no effect on the direction of Nortech Systems i.e., Nortech Systems and SPDR Nuveen go up and down completely randomly.

Pair Corralation between Nortech Systems and SPDR Nuveen

Given the investment horizon of 90 days Nortech Systems Incorporated is expected to generate 11.28 times more return on investment than SPDR Nuveen. However, Nortech Systems is 11.28 times more volatile than SPDR Nuveen Municipal. It trades about 0.0 of its potential returns per unit of risk. SPDR Nuveen Municipal is currently generating about -0.05 per unit of risk. If you would invest  1,014  in Nortech Systems Incorporated on December 28, 2024 and sell it today you would lose (16.00) from holding Nortech Systems Incorporated or give up 1.58% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.36%
Values	Daily Returns

Nortech Systems Incorporated  vs.  SPDR Nuveen Municipal

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 comparatively stable basic indicators, Nortech Systems is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

SPDR Nuveen Municipal

Risk-Adjusted Performance

Very Weak

Over the last 90 days SPDR Nuveen Municipal has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, SPDR Nuveen is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Nortech Systems and SPDR Nuveen

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

The idea behind Nortech Systems Incorporated and SPDR Nuveen Municipal 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..