Correlation Between Wrap Technologies and Electro Sensors

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

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

Diversification Opportunities for Wrap Technologies and Electro Sensors

-0.15

Correlation Coefficient

Wrap Technologies  Electro Sensors

Good diversification

The 3 months correlation between Wrap and Electro is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Wrap Technologies and Electro Sensors in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Electro Sensors and Wrap Technologies 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 Wrap Technologies are associated (or correlated) with Electro Sensors. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Electro Sensors has no effect on the direction of Wrap Technologies i.e., Wrap Technologies and Electro Sensors go up and down completely randomly.

Pair Corralation between Wrap Technologies and Electro Sensors

Given the investment horizon of 90 days Wrap Technologies is expected to under-perform the Electro Sensors. In addition to that, Wrap Technologies is 2.51 times more volatile than Electro Sensors. It trades about -0.26 of its total potential returns per unit of risk. Electro Sensors is currently generating about 0.0 per unit of volatility. If you would invest  408.00  in Electro Sensors on March 1, 2024 and sell it today you would lose (3.00) from holding Electro Sensors or give up 0.74% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.36%
Values	Daily Returns

Wrap Technologies  vs.  Electro Sensors

Wrap Technologies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Wrap Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. Even with unsteady performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in June 2024. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Electro Sensors

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Electro Sensors has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Electro Sensors is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Wrap Technologies and Electro Sensors

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

The idea behind Wrap Technologies and Electro Sensors 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.

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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.