Correlation Between Trans Lux and Microwave Filter
Can any of the company-specific risk be diversified away by investing in both Trans Lux and Microwave Filter 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 Trans Lux and Microwave Filter into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Trans Lux Cp and Microwave Filter, you can compare the effects of market volatilities on Trans Lux and Microwave Filter 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 Trans Lux with a short position of Microwave Filter. Check out your portfolio center. Please also check ongoing floating volatility patterns of Trans Lux and Microwave Filter.
Diversification Opportunities for Trans Lux and Microwave Filter
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Trans and Microwave is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Trans Lux Cp and Microwave Filter in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Microwave Filter and Trans Lux 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 Trans Lux Cp are associated (or correlated) with Microwave Filter. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Microwave Filter has no effect on the direction of Trans Lux i.e., Trans Lux and Microwave Filter go up and down completely randomly.
Pair Corralation between Trans Lux and Microwave Filter
Given the investment horizon of 90 days Trans Lux Cp is expected to generate 6.51 times more return on investment than Microwave Filter. However, Trans Lux is 6.51 times more volatile than Microwave Filter. It trades about 0.08 of its potential returns per unit of risk. Microwave Filter is currently generating about 0.08 per unit of risk. If you would invest 37.00 in Trans Lux Cp on September 3, 2024 and sell it today you would earn a total of 13.00 from holding Trans Lux Cp or generate 35.14% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 25.66% |
| Values | Daily Returns |
Trans Lux Cp vs. Microwave Filter
Performance |
| Timeline |
| Trans Lux Cp |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| Microwave Filter |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Trans Lux and Microwave Filter Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Trans Lux and Microwave Filter
The main advantage of trading using opposite Trans Lux and Microwave Filter positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Trans Lux position performs unexpectedly, Microwave Filter 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 Microwave Filter will offset losses from the drop in Microwave Filter's long position.The idea behind Trans Lux Cp and Microwave Filter 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.| Microwave Filter vs. Cisco Systems | Microwave Filter vs. Juniper Networks | Microwave Filter vs. Nokia Corp ADR | Microwave Filter vs. Motorola Solutions |
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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
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