Correlation Between Fonar and Psychemedics

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

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

Diversification Opportunities for Fonar and Psychemedics

0.93

Correlation Coefficient

Fonar  Psychemedics

Almost no diversification

The 3 months correlation between Fonar and Psychemedics is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Fonar and Psychemedics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Psychemedics and Fonar 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 Fonar are associated (or correlated) with Psychemedics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Psychemedics has no effect on the direction of Fonar i.e., Fonar and Psychemedics go up and down completely randomly.

Pair Corralation between Fonar and Psychemedics

Given the investment horizon of 90 days Fonar is expected to under-perform the Psychemedics. In addition to that, Fonar is 1.07 times more volatile than Psychemedics. It trades about -0.36 of its total potential returns per unit of risk. Psychemedics is currently generating about -0.23 per unit of volatility. If you would invest  285.00  in Psychemedics on February 4, 2024 and sell it today you would lose (30.00) from holding Psychemedics or give up 10.53% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	95.65%
Values	Daily Returns

Fonar  vs.  Psychemedics

Fonar

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fonar has generated negative risk-adjusted returns adding no value to investors with long positions. Even with weak performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in June 2024. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Psychemedics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Psychemedics has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's primary indicators remain rather sound which may send shares a bit higher in June 2024. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Fonar and Psychemedics

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

The idea behind Fonar and Psychemedics 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.