Correlation Between Satcom Systems and Highcon Systems

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

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

Diversification Opportunities for Satcom Systems and Highcon Systems

-0.61

Correlation Coefficient

Satcom Systems  Highcon Systems

Excellent diversification

The 3 months correlation between Satcom and Highcon is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding Satcom Systems and Highcon Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Highcon Systems and Satcom Systems 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 Satcom Systems are associated (or correlated) with Highcon Systems. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Highcon Systems has no effect on the direction of Satcom Systems i.e., Satcom Systems and Highcon Systems go up and down completely randomly.

Pair Corralation between Satcom Systems and Highcon Systems

Assuming the 90 days trading horizon Satcom Systems is expected to generate 0.56 times more return on investment than Highcon Systems. However, Satcom Systems is 1.79 times less risky than Highcon Systems. It trades about 0.1 of its potential returns per unit of risk. Highcon Systems is currently generating about -0.04 per unit of risk. If you would invest  5,900  in Satcom Systems on September 27, 2024 and sell it today you would earn a total of  1,580  from holding Satcom Systems or generate 26.78% return on investment over 90 days.

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

Satcom Systems  vs.  Highcon Systems

Satcom Systems

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Satcom Systems are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Satcom Systems sustained solid returns over the last few months and may actually be approaching a breakup point.

Highcon Systems

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Highcon Systems has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Highcon Systems is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Satcom Systems and Highcon Systems

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

The idea behind Satcom Systems and Highcon Systems 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.