Correlation Between Frequency Electronics and Baylin Technologies

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

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

Diversification Opportunities for Frequency Electronics and Baylin Technologies

0.46

Correlation Coefficient

Frequency Electronics  Baylin Technologies

Very weak diversification

The 3 months correlation between Frequency and Baylin is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Frequency Electronics and Baylin Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Baylin Technologies and Frequency 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 Frequency Electronics are associated (or correlated) with Baylin Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Baylin Technologies has no effect on the direction of Frequency Electronics i.e., Frequency Electronics and Baylin Technologies go up and down completely randomly.

Pair Corralation between Frequency Electronics and Baylin Technologies

Given the investment horizon of 90 days Frequency Electronics is expected to generate 1.59 times less return on investment than Baylin Technologies. But when comparing it to its historical volatility, Frequency Electronics is 1.79 times less risky than Baylin Technologies. It trades about 0.12 of its potential returns per unit of risk. Baylin Technologies is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  20.00  in Baylin Technologies on September 21, 2024 and sell it today you would earn a total of  16.00  from holding Baylin Technologies or generate 80.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	99.07%
Values	Daily Returns

Frequency Electronics  vs.  Baylin Technologies

Frequency Electronics

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Frequency Electronics are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of very weak forward indicators, Frequency Electronics displayed solid returns over the last few months and may actually be approaching a breakup point.

Baylin Technologies

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Baylin Technologies are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Baylin Technologies reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Frequency Electronics and Baylin Technologies

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

The idea behind Frequency Electronics and Baylin Technologies 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.