Correlation Between Iteris and Hollysys Automation

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

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

Diversification Opportunities for Iteris and Hollysys Automation

0.74

Correlation Coefficient

Iteris  Hollysys Automation

Poor diversification

The 3 months correlation between Iteris and Hollysys is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Iteris Inc and Hollysys Automation Technologi in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hollysys Automation and Iteris 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 Iteris Inc are associated (or correlated) with Hollysys Automation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hollysys Automation has no effect on the direction of Iteris i.e., Iteris and Hollysys Automation go up and down completely randomly.

Pair Corralation between Iteris and Hollysys Automation

Considering the 90-day investment horizon Iteris Inc is expected to generate 1.07 times more return on investment than Hollysys Automation. However, Iteris is 1.07 times more volatile than Hollysys Automation Technologies. It trades about -0.13 of its potential returns per unit of risk. Hollysys Automation Technologies is currently generating about -0.24 per unit of risk. If you would invest  481.00  in Iteris Inc on February 4, 2024 and sell it today you would lose (21.00) from holding Iteris Inc or give up 4.37% of portfolio value over 90 days.

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

Iteris Inc  vs.  Hollysys Automation Technologi

Iteris Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Iteris Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, Iteris is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Hollysys Automation

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hollysys Automation Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest inconsistent performance, the Stock's essential indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Pair Trading with Iteris and Hollysys Automation

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

The idea behind Iteris Inc and Hollysys Automation Technologies 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.