Correlation Between Photronics and InTest

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

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

Diversification Opportunities for Photronics and InTest

0.67

Correlation Coefficient

Photronics  InTest

Poor diversification

The 3 months correlation between Photronics and InTest is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Photronics and inTest in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on inTest and Photronics 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 Photronics are associated (or correlated) with InTest. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of inTest has no effect on the direction of Photronics i.e., Photronics and InTest go up and down completely randomly.

Pair Corralation between Photronics and InTest

Given the investment horizon of 90 days Photronics is expected to generate 0.58 times more return on investment than InTest. However, Photronics is 1.72 times less risky than InTest. It trades about -0.11 of its potential returns per unit of risk. inTest is currently generating about -0.08 per unit of risk. If you would invest  2,352  in Photronics on December 30, 2024 and sell it today you would lose (292.00) from holding Photronics or give up 12.41% of portfolio value over 90 days.

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

Photronics  vs.  inTest

Photronics

Risk-Adjusted Performance

Very Weak

Over the last 90 days Photronics has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

inTest

Risk-Adjusted Performance

Very Weak

Over the last 90 days inTest has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Photronics and InTest

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

The idea behind Photronics and inTest 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.