Correlation Between Electro Sensors and Saddle Ranch

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

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

Diversification Opportunities for Electro Sensors and Saddle Ranch

0.03

Correlation Coefficient

Electro Sensors  Saddle Ranch

Significant diversification

The 3 months correlation between Electro and Saddle is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Electro Sensors and Saddle Ranch Media in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Saddle Ranch Media and Electro Sensors 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 Electro Sensors are associated (or correlated) with Saddle Ranch. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Saddle Ranch Media has no effect on the direction of Electro Sensors i.e., Electro Sensors and Saddle Ranch go up and down completely randomly.

Pair Corralation between Electro Sensors and Saddle Ranch

Given the investment horizon of 90 days Electro Sensors is expected to generate 37.77 times less return on investment than Saddle Ranch. But when comparing it to its historical volatility, Electro Sensors is 16.23 times less risky than Saddle Ranch. It trades about 0.08 of its potential returns per unit of risk. Saddle Ranch Media is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  0.01  in Saddle Ranch Media on September 12, 2024 and sell it today you would earn a total of  0.01  from holding Saddle Ranch Media or generate 100.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	92.06%
Values	Daily Returns

Electro Sensors  vs.  Saddle Ranch Media

Electro Sensors

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Electro Sensors are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, Electro Sensors may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Saddle Ranch Media

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Saddle Ranch Media are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating primary indicators, Saddle Ranch showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Electro Sensors and Saddle Ranch

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

The idea behind Electro Sensors and Saddle Ranch Media 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.