Correlation Between Greatek Electronics and Radiant Opto

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

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

Diversification Opportunities for Greatek Electronics and Radiant Opto

0.3

Correlation Coefficient

Greatek Electronics  Radiant Opto

Weak diversification

The 3 months correlation between Greatek and Radiant is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Greatek Electronics and Radiant Opto Electronics Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Radiant Opto Electro and Greatek 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 Greatek Electronics are associated (or correlated) with Radiant Opto. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Radiant Opto Electro has no effect on the direction of Greatek Electronics i.e., Greatek Electronics and Radiant Opto go up and down completely randomly.

Pair Corralation between Greatek Electronics and Radiant Opto

Assuming the 90 days trading horizon Greatek Electronics is expected to under-perform the Radiant Opto. But the stock apears to be less risky and, when comparing its historical volatility, Greatek Electronics is 1.8 times less risky than Radiant Opto. The stock trades about -0.01 of its potential returns per unit of risk. The Radiant Opto Electronics Corp is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  20,000  in Radiant Opto Electronics Corp on September 15, 2024 and sell it today you would lose (150.00) from holding Radiant Opto Electronics Corp or give up 0.75% of portfolio value over 90 days.

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

Greatek Electronics  vs.  Radiant Opto Electronics Corp

Greatek Electronics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Greatek Electronics has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Greatek Electronics is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Radiant Opto Electro

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Radiant Opto Electronics Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Radiant Opto 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 Greatek Electronics and Radiant Opto

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

The idea behind Greatek Electronics and Radiant Opto Electronics 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.

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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.