Correlation Between SurModics and Nortech Systems

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

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

Diversification Opportunities for SurModics and Nortech Systems

0.53

Correlation Coefficient

SurModics  Nortech Systems

Very weak diversification

The 3 months correlation between SurModics and Nortech is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding SurModics and Nortech Systems Incorporated in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nortech Systems and SurModics 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 SurModics 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 SurModics i.e., SurModics and Nortech Systems go up and down completely randomly.

Pair Corralation between SurModics and Nortech Systems

Given the investment horizon of 90 days SurModics is expected to under-perform the Nortech Systems. But the stock apears to be less risky and, when comparing its historical volatility, SurModics is 1.54 times less risky than Nortech Systems. The stock trades about -0.09 of its potential returns per unit of risk. The Nortech Systems Incorporated is currently generating about -0.06 of returns per unit of risk over similar time horizon. If you would invest  1,160  in Nortech Systems Incorporated on November 29, 2024 and sell it today you would lose (109.00) from holding Nortech Systems Incorporated or give up 9.4% of portfolio value over 90 days.

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

SurModics  vs.  Nortech Systems Incorporated

SurModics

Risk-Adjusted Performance

Very Weak

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

Nortech Systems

Risk-Adjusted Performance

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 unsteady 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 SurModics and Nortech Systems

The main advantage of trading using opposite SurModics and Nortech Systems positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SurModics 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 SurModics 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.