Correlation Between Optical Cable and Frequency Electronics

Can any of the company-specific risk be diversified away by investing in both Optical Cable and Frequency Electronics 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 Optical Cable and Frequency Electronics into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Optical Cable and Frequency Electronics, you can compare the effects of market volatilities on Optical Cable and Frequency Electronics 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 Optical Cable with a short position of Frequency Electronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Optical Cable and Frequency Electronics.

Diversification Opportunities for Optical Cable and Frequency Electronics

-0.14

Correlation Coefficient

Optical Cable  Frequency Electronics

Good diversification

The 3 months correlation between Optical and Frequency is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Optical Cable and Frequency Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Frequency Electronics and Optical Cable 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 Optical Cable are associated (or correlated) with Frequency Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Frequency Electronics has no effect on the direction of Optical Cable i.e., Optical Cable and Frequency Electronics go up and down completely randomly.

Pair Corralation between Optical Cable and Frequency Electronics

Considering the 90-day investment horizon Optical Cable is expected to under-perform the Frequency Electronics. In addition to that, Optical Cable is 1.36 times more volatile than Frequency Electronics. It trades about -0.1 of its total potential returns per unit of risk. Frequency Electronics is currently generating about 0.01 per unit of volatility. If you would invest  1,394  in Frequency Electronics on August 31, 2024 and sell it today you would lose (5.00) from holding Frequency Electronics or give up 0.36% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Optical Cable  vs.  Frequency Electronics

Optical Cable

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Optical Cable has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Stock's fundamental indicators remain rather sound which may send shares a bit higher in December 2024. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Frequency Electronics

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Optical Cable and Frequency Electronics

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

The idea behind Optical Cable and Frequency Electronics 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.