Correlation Between Syntec Optics and COVANTA

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

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

Diversification Opportunities for Syntec Optics and COVANTA

-0.81

Correlation Coefficient

Syntec Optics  COVANTA

Pay attention - limited upside

The 3 months correlation between Syntec and COVANTA is -0.81. Overlapping area represents the amount of risk that can be diversified away by holding Syntec Optics Holdings and COVANTA HLDG P in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on COVANTA HLDG P and Syntec Optics 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 Syntec Optics Holdings are associated (or correlated) with COVANTA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of COVANTA HLDG P has no effect on the direction of Syntec Optics i.e., Syntec Optics and COVANTA go up and down completely randomly.

Pair Corralation between Syntec Optics and COVANTA

Given the investment horizon of 90 days Syntec Optics is expected to generate 9.29 times less return on investment than COVANTA. But when comparing it to its historical volatility, Syntec Optics Holdings is 4.49 times less risky than COVANTA. It trades about 0.02 of its potential returns per unit of risk. COVANTA HLDG P is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  8,472  in COVANTA HLDG P on September 30, 2024 and sell it today you would lose (437.00) from holding COVANTA HLDG P or give up 5.16% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	91.96%
Values	Daily Returns

Syntec Optics Holdings  vs.  COVANTA HLDG P

Syntec Optics Holdings

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Syntec Optics Holdings are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain basic indicators, Syntec Optics showed solid returns over the last few months and may actually be approaching a breakup point.

COVANTA HLDG P

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days COVANTA HLDG P has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Bond's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for COVANTA HLDG P investors.

Pair Trading with Syntec Optics and COVANTA

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

The idea behind Syntec Optics Holdings and COVANTA HLDG P 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.