Correlation Between Frequency Electronics and DZS

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Can any of the company-specific risk be diversified away by investing in both Frequency Electronics and DZS 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 Frequency Electronics and DZS into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Frequency Electronics and DZS Inc, you can compare the effects of market volatilities on Frequency Electronics and DZS 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 Frequency Electronics with a short position of DZS. Check out your portfolio center. Please also check ongoing floating volatility patterns of Frequency Electronics and DZS.

Diversification Opportunities for Frequency Electronics and DZS

0.18
  Correlation Coefficient

Average diversification

The 3 months correlation between Frequency and DZS is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Frequency Electronics and DZS Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DZS Inc and Frequency Electronics 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 Frequency Electronics are associated (or correlated) with DZS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DZS Inc has no effect on the direction of Frequency Electronics i.e., Frequency Electronics and DZS go up and down completely randomly.

Pair Corralation between Frequency Electronics and DZS

Given the investment horizon of 90 days Frequency Electronics is expected to generate 0.33 times more return on investment than DZS. However, Frequency Electronics is 3.0 times less risky than DZS. It trades about 0.13 of its potential returns per unit of risk. DZS Inc is currently generating about -0.12 per unit of risk. If you would invest  1,024  in Frequency Electronics on December 1, 2023 and sell it today you would earn a total of  47.00  from holding Frequency Electronics or generate 4.59% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Frequency Electronics  vs.  DZS Inc

 Performance 
       Timeline  
Frequency Electronics 

Risk-Adjusted Performance

2 of 100

 
Low
 
High
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in Frequency Electronics are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy forward indicators, Frequency Electronics is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.
DZS Inc 

Risk-Adjusted Performance

1 of 100

 
Low
 
High
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in DZS Inc are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite fairly conflicting basic indicators, DZS may actually be approaching a critical reversion point that can send shares even higher in March 2024.

Frequency Electronics and DZS Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Frequency Electronics and DZS

The main advantage of trading using opposite Frequency Electronics and DZS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Frequency Electronics position performs unexpectedly, DZS 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 DZS will offset losses from the drop in DZS's long position.
The idea behind Frequency Electronics and DZS Inc 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.

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