Correlation Between PC Connection and Taitron Components

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

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

Diversification Opportunities for PC Connection and Taitron Components

0.25

Correlation Coefficient

PC Connection  Taitron Components

Modest diversification

The 3 months correlation between CNXN and Taitron is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding PC Connection and Taitron Components Incorporate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Taitron Components and PC Connection 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 PC Connection are associated (or correlated) with Taitron Components. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Taitron Components has no effect on the direction of PC Connection i.e., PC Connection and Taitron Components go up and down completely randomly.

Pair Corralation between PC Connection and Taitron Components

Given the investment horizon of 90 days PC Connection is expected to generate 1.64 times more return on investment than Taitron Components. However, PC Connection is 1.64 times more volatile than Taitron Components Incorporated. It trades about 0.01 of its potential returns per unit of risk. Taitron Components Incorporated is currently generating about -0.04 per unit of risk. If you would invest  7,298  in PC Connection on August 30, 2024 and sell it today you would earn a total of  7.00  from holding PC Connection or generate 0.1% return on investment over 90 days.

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

PC Connection  vs.  Taitron Components Incorporate

PC Connection

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PC Connection has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, PC Connection is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Taitron Components

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Taitron Components Incorporated has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable forward indicators, Taitron Components is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with PC Connection and Taitron Components

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

The idea behind PC Connection and Taitron Components Incorporated 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.