Correlation Between SigmaTron International and Kopin

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

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

Diversification Opportunities for SigmaTron International and Kopin

-0.6

Correlation Coefficient

SigmaTron International  Kopin

Excellent diversification

The 3 months correlation between SigmaTron and Kopin is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding SigmaTron International and Kopin in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kopin and SigmaTron International 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 SigmaTron International are associated (or correlated) with Kopin. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kopin has no effect on the direction of SigmaTron International i.e., SigmaTron International and Kopin go up and down completely randomly.

Pair Corralation between SigmaTron International and Kopin

Given the investment horizon of 90 days SigmaTron International is expected to under-perform the Kopin. But the stock apears to be less risky and, when comparing its historical volatility, SigmaTron International is 1.23 times less risky than Kopin. The stock trades about -0.2 of its potential returns per unit of risk. The Kopin is currently generating about 0.29 of returns per unit of risk over similar time horizon. If you would invest  83.00  in Kopin on September 17, 2024 and sell it today you would earn a total of  26.00  from holding Kopin or generate 31.33% return on investment over 90 days.

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

SigmaTron International  vs.  Kopin

SigmaTron International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SigmaTron International has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's primary indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Kopin

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Kopin are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady basic indicators, Kopin displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with SigmaTron International and Kopin

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

The idea behind SigmaTron International and Kopin 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.