Correlation Between Nortech Systems and SigmaTron International

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

Diversification Opportunities for Nortech Systems and SigmaTron International

0.26

Correlation Coefficient

Nortech Systems  SigmaTron International

Modest diversification

The 3 months correlation between Nortech and SigmaTron is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Nortech Systems Incorporated and SigmaTron International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SigmaTron International 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 SigmaTron International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SigmaTron International has no effect on the direction of Nortech Systems i.e., Nortech Systems and SigmaTron International go up and down completely randomly.

Pair Corralation between Nortech Systems and SigmaTron International

Given the investment horizon of 90 days Nortech Systems Incorporated is expected to generate 0.85 times more return on investment than SigmaTron International. However, Nortech Systems Incorporated is 1.18 times less risky than SigmaTron International. It trades about 0.25 of its potential returns per unit of risk. SigmaTron International is currently generating about -0.27 per unit of risk. If you would invest  973.00  in Nortech Systems Incorporated on September 15, 2024 and sell it today you would earn a total of  177.00  from holding Nortech Systems Incorporated or generate 18.19% return on investment over 90 days.

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

Nortech Systems Incorporated  vs.  SigmaTron International

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

SigmaTron International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SigmaTron International has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's primary indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Nortech Systems and SigmaTron International

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

The idea behind Nortech Systems Incorporated and SigmaTron International 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.