Correlation Between SigmaTron International and Research Frontiers

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

By analyzing existing cross correlation between SigmaTron International and Research Frontiers Incorporated, you can compare the effects of market volatilities on SigmaTron International and Research Frontiers 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 SigmaTron International with a short position of Research Frontiers. Check out your portfolio center. Please also check ongoing floating volatility patterns of SigmaTron International and Research Frontiers.

Diversification Opportunities for SigmaTron International and Research Frontiers

0.46

Correlation Coefficient

SigmaTron International  Research Frontiers

Very weak diversification

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

Pair Corralation between SigmaTron International and Research Frontiers

Given the investment horizon of 90 days SigmaTron International is expected to under-perform the Research Frontiers. But the stock apears to be less risky and, when comparing its historical volatility, SigmaTron International is 1.11 times less risky than Research Frontiers. The stock trades about -0.1 of its potential returns per unit of risk. The Research Frontiers Incorporated is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  196.00  in Research Frontiers Incorporated on September 17, 2024 and sell it today you would lose (18.00) from holding Research Frontiers Incorporated or give up 9.18% of portfolio value over 90 days.

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

SigmaTron International  vs.  Research Frontiers Incorporate

SigmaTron International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SigmaTron International has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's primary 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 the company investors.

Research Frontiers

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Research Frontiers Incorporated has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable technical and fundamental indicators, Research Frontiers is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with SigmaTron International and Research Frontiers

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

The idea behind SigmaTron International and Research Frontiers Incorporated 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.