Correlation Between Sight Sciences and Nortech Systems

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

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

Diversification Opportunities for Sight Sciences and Nortech Systems

0.71

Correlation Coefficient

Sight Sciences  Nortech Systems

Poor diversification

The 3 months correlation between Sight and Nortech is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Sight Sciences and Nortech Systems Incorporated in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nortech Systems and Sight Sciences 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 Sight Sciences are associated (or correlated) with Nortech Systems. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nortech Systems has no effect on the direction of Sight Sciences i.e., Sight Sciences and Nortech Systems go up and down completely randomly.

Pair Corralation between Sight Sciences and Nortech Systems

Given the investment horizon of 90 days Sight Sciences is expected to under-perform the Nortech Systems. But the stock apears to be less risky and, when comparing its historical volatility, Sight Sciences is 1.04 times less risky than Nortech Systems. The stock trades about -0.13 of its potential returns per unit of risk. The Nortech Systems Incorporated is currently generating about 0.03 of returns per unit of risk over similar time horizon. 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 Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Sight Sciences  vs.  Nortech Systems Incorporated

Sight Sciences

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sight Sciences 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 technical indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

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.

Pair Trading with Sight Sciences and Nortech Systems

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

The idea behind Sight Sciences and Nortech Systems Incorporated 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.