Correlation Between Key Tronic and IONQ

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

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

Diversification Opportunities for Key Tronic and IONQ

0.22

Correlation Coefficient

Key Tronic  IONQ

Modest diversification

The 3 months correlation between Key and IONQ is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Key Tronic and IONQ Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IONQ Inc and Key Tronic 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 Key Tronic are associated (or correlated) with IONQ. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IONQ Inc has no effect on the direction of Key Tronic i.e., Key Tronic and IONQ go up and down completely randomly.

Pair Corralation between Key Tronic and IONQ

Given the investment horizon of 90 days Key Tronic is expected to under-perform the IONQ. But the stock apears to be less risky and, when comparing its historical volatility, Key Tronic is 3.85 times less risky than IONQ. The stock trades about -0.31 of its potential returns per unit of risk. The IONQ Inc is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest  2,352  in IONQ Inc on September 11, 2024 and sell it today you would earn a total of  1,072  from holding IONQ Inc or generate 45.58% return on investment over 90 days.

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

Key Tronic  vs.  IONQ Inc

Key Tronic

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Key Tronic are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak fundamental indicators, Key Tronic may actually be approaching a critical reversion point that can send shares even higher in January 2025.

IONQ Inc

Risk-Adjusted Performance

26 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in IONQ Inc are ranked lower than 26 (%) of all global equities and portfolios over the last 90 days. Even with relatively conflicting basic indicators, IONQ reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Key Tronic and IONQ

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

The idea behind Key Tronic and IONQ Inc 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.