Correlation Between Benchmark Electronics and Daktronics

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

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

Diversification Opportunities for Benchmark Electronics and Daktronics

0.71

Correlation Coefficient

Benchmark Electronics  Daktronics

Poor diversification

The 3 months correlation between Benchmark and Daktronics is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Benchmark Electronics and Daktronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Daktronics and Benchmark 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 Benchmark Electronics 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 Benchmark Electronics i.e., Benchmark Electronics and Daktronics go up and down completely randomly.

Pair Corralation between Benchmark Electronics and Daktronics

Considering the 90-day investment horizon Benchmark Electronics is expected to generate 2.34 times less return on investment than Daktronics. In addition to that, Benchmark Electronics is 1.24 times more volatile than Daktronics. It trades about 0.1 of its total potential returns per unit of risk. Daktronics is currently generating about 0.28 per unit of volatility. If you would invest  1,328  in Daktronics on August 31, 2024 and sell it today you would earn a total of  212.00  from holding Daktronics or generate 15.96% return on investment over 90 days.

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

Benchmark Electronics  vs.  Daktronics

Benchmark Electronics

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Benchmark Electronics are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating technical indicators, Benchmark Electronics exhibited solid returns over the last few months and may actually be approaching a breakup point.

Daktronics

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Daktronics are ranked lower than 7 (%) 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 Benchmark Electronics and Daktronics

The main advantage of trading using opposite Benchmark Electronics and Daktronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Benchmark Electronics 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 Benchmark Electronics 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.

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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.