Correlation Between Frequency Electronics and PowerFleet

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

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

Diversification Opportunities for Frequency Electronics and PowerFleet

-0.18

Correlation Coefficient

Frequency Electronics  PowerFleet

Good diversification

The 3 months correlation between Frequency and PowerFleet is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding Frequency Electronics and PowerFleet in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PowerFleet 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 PowerFleet. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PowerFleet has no effect on the direction of Frequency Electronics i.e., Frequency Electronics and PowerFleet go up and down completely randomly.

Pair Corralation between Frequency Electronics and PowerFleet

If you would invest  1,196  in Frequency Electronics on September 21, 2024 and sell it today you would earn a total of  706.00  from holding Frequency Electronics or generate 59.03% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	1.56%
Values	Daily Returns

Frequency Electronics  vs.  PowerFleet

Frequency Electronics

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Frequency Electronics are ranked lower than 15 (%) 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.

PowerFleet

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PowerFleet has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent technical and fundamental indicators, PowerFleet is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Frequency Electronics and PowerFleet

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

The idea behind Frequency Electronics and PowerFleet 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.