Correlation Between Nortech Systems and STRATA Skin

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

Diversification Opportunities for Nortech Systems and STRATA Skin

-0.36

Correlation Coefficient

Nortech Systems  STRATA Skin

Very good diversification

The 3 months correlation between Nortech and STRATA is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Nortech Systems Incorporated and STRATA Skin Sciences in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on STRATA Skin Sciences 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 STRATA Skin. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of STRATA Skin Sciences has no effect on the direction of Nortech Systems i.e., Nortech Systems and STRATA Skin go up and down completely randomly.

Pair Corralation between Nortech Systems and STRATA Skin

Given the investment horizon of 90 days Nortech Systems Incorporated is expected to generate 1.49 times more return on investment than STRATA Skin. However, Nortech Systems is 1.49 times more volatile than STRATA Skin Sciences. It trades about 0.03 of its potential returns per unit of risk. STRATA Skin Sciences is currently generating about -0.06 per unit of risk. If you would invest  1,061  in Nortech Systems Incorporated on September 27, 2024 and sell it today you would earn a total of  14.00  from holding Nortech Systems Incorporated or generate 1.32% return on investment over 90 days.

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

Nortech Systems Incorporated  vs.  STRATA Skin Sciences

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 latest uncertain 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.

STRATA Skin Sciences

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days STRATA Skin Sciences has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy forward-looking signals, STRATA Skin is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Nortech Systems and STRATA Skin

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

The idea behind Nortech Systems Incorporated and STRATA Skin Sciences 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.