Correlation Between Federal Signal and Mikros Systems

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Can any of the company-specific risk be diversified away by investing in both Federal Signal and Mikros 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 Federal Signal and Mikros Systems into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Federal Signal and Mikros Systems, you can compare the effects of market volatilities on Federal Signal and Mikros 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 Federal Signal with a short position of Mikros Systems. Check out your portfolio center. Please also check ongoing floating volatility patterns of Federal Signal and Mikros Systems.

Diversification Opportunities for Federal Signal and Mikros Systems

0.0
  Correlation Coefficient

Pay attention - limited upside

The 3 months correlation between Federal and Mikros is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Federal Signal and Mikros Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mikros Systems and Federal Signal 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 Federal Signal are associated (or correlated) with Mikros Systems. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mikros Systems has no effect on the direction of Federal Signal i.e., Federal Signal and Mikros Systems go up and down completely randomly.

Pair Corralation between Federal Signal and Mikros Systems

If you would invest  8,213  in Federal Signal on December 30, 2023 and sell it today you would earn a total of  274.00  from holding Federal Signal or generate 3.34% return on investment over 90 days.
Time Period3 Months [change]
DirectionFlat 
StrengthInsignificant
Accuracy0.0%
ValuesDaily Returns

Federal Signal  vs.  Mikros Systems

 Performance 
       Timeline  
Federal Signal 

Risk-Adjusted Performance

11 of 100

 
Low
 
High
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Federal Signal are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively inconsistent basic indicators, Federal Signal unveiled solid returns over the last few months and may actually be approaching a breakup point.
Mikros Systems 

Risk-Adjusted Performance

0 of 100

 
Low
 
High
Very Weak
Over the last 90 days Mikros Systems has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Mikros Systems is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Federal Signal and Mikros Systems Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Federal Signal and Mikros Systems

The main advantage of trading using opposite Federal Signal and Mikros Systems positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Federal Signal position performs unexpectedly, Mikros 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 Mikros Systems will offset losses from the drop in Mikros Systems' long position.
The idea behind Federal Signal and Mikros 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.
Check out your portfolio center.
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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.

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