Correlation Between Procyon and Electronic Control

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

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

Diversification Opportunities for Procyon and Electronic Control

0.66

Correlation Coefficient

Procyon  Electronic Control

Poor diversification

The 3 months correlation between Procyon and Electronic is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Procyon and Electronic Control Security in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Electronic Control and Procyon 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 Procyon are associated (or correlated) with Electronic Control. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Electronic Control has no effect on the direction of Procyon i.e., Procyon and Electronic Control go up and down completely randomly.

Pair Corralation between Procyon and Electronic Control

Given the investment horizon of 90 days Procyon is expected to generate 46.15 times less return on investment than Electronic Control. But when comparing it to its historical volatility, Procyon is 3.28 times less risky than Electronic Control. It trades about 0.01 of its potential returns per unit of risk. Electronic Control Security is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  0.15  in Electronic Control Security on September 29, 2024 and sell it today you would lose (0.07) from holding Electronic Control Security or give up 46.67% of portfolio value over 90 days.

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

Procyon  vs.  Electronic Control Security

Procyon

Risk-Adjusted Performance

0 of 100

Very Weak

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

Electronic Control

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Electronic Control Security are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively abnormal fundamental indicators, Electronic Control unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Procyon and Electronic Control

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

The idea behind Procyon and Electronic Control Security 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .