Correlation Between CTS and Daktronics

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

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

Diversification Opportunities for CTS and Daktronics

0.93

Correlation Coefficient

CTS  Daktronics

Almost no diversification

The 3 months correlation between CTS and Daktronics is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding CTS Corp. and Daktronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Daktronics and CTS 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 CTS Corporation are associated (or correlated) with Daktronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Daktronics has no effect on the direction of CTS i.e., CTS and Daktronics go up and down completely randomly.

Pair Corralation between CTS and Daktronics

Considering the 90-day investment horizon CTS Corporation is expected to under-perform the Daktronics. But the stock apears to be less risky and, when comparing its historical volatility, CTS Corporation is 1.11 times less risky than Daktronics. The stock trades about -0.14 of its potential returns per unit of risk. The Daktronics is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  1,112  in Daktronics on March 21, 2024 and sell it today you would lose (13.00) from holding Daktronics or give up 1.17% of portfolio value over 90 days.

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

CTS Corp.  vs.  Daktronics

CTS Corporation

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in CTS Corporation are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively conflicting basic indicators, CTS may actually be approaching a critical reversion point that can send shares even higher in July 2024.

Daktronics

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Daktronics are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain forward-looking signals, Daktronics unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CTS and Daktronics

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

The idea behind CTS Corporation and Daktronics 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.