Correlation Between Coherent and Microvision

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

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

Diversification Opportunities for Coherent and Microvision

0.1

Correlation Coefficient

Coherent  Microvision

Average diversification

The 3 months correlation between Coherent and Microvision is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Coherent and Microvision in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Microvision and Coherent 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 Coherent are associated (or correlated) with Microvision. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Microvision has no effect on the direction of Coherent i.e., Coherent and Microvision go up and down completely randomly.

Pair Corralation between Coherent and Microvision

Given the investment horizon of 90 days Coherent is expected to generate 0.81 times more return on investment than Microvision. However, Coherent is 1.23 times less risky than Microvision. It trades about 0.19 of its potential returns per unit of risk. Microvision is currently generating about -0.02 per unit of risk. If you would invest  7,426  in Coherent on September 5, 2024 and sell it today you would earn a total of  3,228  from holding Coherent or generate 43.47% return on investment over 90 days.

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

Coherent  vs.  Microvision

Coherent

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Coherent are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Even with relatively inconsistent technical indicators, Coherent reported solid returns over the last few months and may actually be approaching a breakup point.

Microvision

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Coherent and Microvision

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

The idea behind Coherent and Microvision 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.