Correlation Between Nortech Systems and Sparta Capital
Can any of the company-specific risk be diversified away by investing in both Nortech Systems and Sparta Capital 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 Nortech Systems and Sparta Capital into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Nortech Systems Incorporated and Sparta Capital, you can compare the effects of market volatilities on Nortech Systems and Sparta Capital 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 Nortech Systems with a short position of Sparta Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nortech Systems and Sparta Capital.
Diversification Opportunities for Nortech Systems and Sparta Capital
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Nortech and Sparta is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Nortech Systems Incorporated and Sparta Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sparta Capital and Nortech Systems 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 Nortech Systems Incorporated are associated (or correlated) with Sparta Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sparta Capital has no effect on the direction of Nortech Systems i.e., Nortech Systems and Sparta Capital go up and down completely randomly.
Pair Corralation between Nortech Systems and Sparta Capital
Given the investment horizon of 90 days Nortech Systems Incorporated is expected to generate 1.64 times more return on investment than Sparta Capital. However, Nortech Systems is 1.64 times more volatile than Sparta Capital. It trades about -0.01 of its potential returns per unit of risk. Sparta Capital is currently generating about -0.09 per unit of risk. If you would invest 1,189 in Nortech Systems Incorporated on August 28, 2024 and sell it today you would lose (128.00) from holding Nortech Systems Incorporated or give up 10.77% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Nortech Systems Incorporated vs. Sparta Capital
Performance |
| Timeline |
| Nortech Systems |
| Sparta Capital |
Nortech Systems and Sparta Capital Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nortech Systems and Sparta Capital
The main advantage of trading using opposite Nortech Systems and Sparta Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nortech Systems position performs unexpectedly, Sparta Capital 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 Sparta Capital will offset losses from the drop in Sparta Capital's long position.| Nortech Systems vs. Neuropace | Nortech Systems vs. Electromed | Nortech Systems vs. Orthopediatrics Corp | Nortech Systems vs. SurModics |
| Sparta Capital vs. Copa Holdings SA | Sparta Capital vs. United Airlines Holdings | Sparta Capital vs. Delta Air Lines | Sparta Capital vs. SkyWest |
Check out your portfolio center.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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.
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