Correlation Between Compeq Manufacturing and ITEQ Corp

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

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

Diversification Opportunities for Compeq Manufacturing and ITEQ Corp

-0.53

Correlation Coefficient

Compeq Manufacturing  ITEQ Corp

Excellent diversification

The 3 months correlation between Compeq and ITEQ is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Compeq Manufacturing Co and ITEQ Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ITEQ Corp and Compeq Manufacturing 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 Compeq Manufacturing Co are associated (or correlated) with ITEQ Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ITEQ Corp has no effect on the direction of Compeq Manufacturing i.e., Compeq Manufacturing and ITEQ Corp go up and down completely randomly.

Pair Corralation between Compeq Manufacturing and ITEQ Corp

Assuming the 90 days trading horizon Compeq Manufacturing Co is expected to under-perform the ITEQ Corp. But the stock apears to be less risky and, when comparing its historical volatility, Compeq Manufacturing Co is 1.43 times less risky than ITEQ Corp. The stock trades about -0.04 of its potential returns per unit of risk. The ITEQ Corp is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  7,760  in ITEQ Corp on September 12, 2024 and sell it today you would lose (60.00) from holding ITEQ Corp or give up 0.77% of portfolio value over 90 days.

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

Compeq Manufacturing Co  vs.  ITEQ Corp

Compeq Manufacturing

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Compeq Manufacturing Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

ITEQ Corp

Risk-Adjusted Performance

3 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in ITEQ Corp are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, ITEQ Corp is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Compeq Manufacturing and ITEQ Corp

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

The idea behind Compeq Manufacturing Co and ITEQ Corp 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.