Correlation Between Precision Optics, and Nephros

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

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

Diversification Opportunities for Precision Optics, and Nephros

0.84

Correlation Coefficient

Precision Optics,  Nephros

Very poor diversification

The 3 months correlation between Precision and Nephros is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Precision Optics, and Nephros in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nephros and Precision Optics, 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 Precision Optics, are associated (or correlated) with Nephros. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nephros has no effect on the direction of Precision Optics, i.e., Precision Optics, and Nephros go up and down completely randomly.

Pair Corralation between Precision Optics, and Nephros

Given the investment horizon of 90 days Precision Optics, is expected to generate 2.04 times more return on investment than Nephros. However, Precision Optics, is 2.04 times more volatile than Nephros. It trades about 0.01 of its potential returns per unit of risk. Nephros is currently generating about -0.12 per unit of risk. If you would invest  525.00  in Precision Optics, on August 30, 2024 and sell it today you would lose (22.00) from holding Precision Optics, or give up 4.19% of portfolio value over 90 days.

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

Precision Optics,  vs.  Nephros

Precision Optics,

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Precision Optics, has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong fundamental indicators, Precision Optics, is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Nephros

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nephros has generated negative risk-adjusted returns adding no value to investors with long positions. Despite inconsistent performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in December 2024. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with Precision Optics, and Nephros

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

The idea behind Precision Optics, and Nephros 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.