Correlation Between Precision Optics and ATRION

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

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

Diversification Opportunities for Precision Optics and ATRION

0.78

Correlation Coefficient

Precision Optics  ATRION

Poor diversification

The 3 months correlation between Precision and ATRION is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Precision Optics and ATRION in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ATRION and Precision 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 Precision Optics are associated (or correlated) with ATRION. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ATRION has no effect on the direction of Precision Optics i.e., Precision Optics and ATRION go up and down completely randomly.

Pair Corralation between Precision Optics and ATRION

Given the investment horizon of 90 days Precision Optics is expected to generate 1.05 times less return on investment than ATRION. But when comparing it to its historical volatility, Precision Optics is 1.14 times less risky than ATRION. It trades about 0.06 of its potential returns per unit of risk. ATRION is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  41,805  in ATRION on March 14, 2024 and sell it today you would earn a total of  3,635  from holding ATRION or generate 8.7% return on investment over 90 days.

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

Precision Optics  vs.  ATRION

Precision Optics

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Precision Optics are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak fundamental indicators, Precision Optics may actually be approaching a critical reversion point that can send shares even higher in July 2024.

ATRION

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in ATRION are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak basic indicators, ATRION demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Precision Optics and ATRION

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

The idea behind Precision Optics and ATRION 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.