Correlation Between Coloray International and ABCO Electronics

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

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

Diversification Opportunities for Coloray International and ABCO Electronics

-0.17

Correlation Coefficient

Coloray International  ABCO Electronics

Good diversification

The 3 months correlation between Coloray and ABCO is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Coloray International Investme and ABCO Electronics Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ABCO Electronics and Coloray 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 Coloray International Investment are associated (or correlated) with ABCO Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ABCO Electronics has no effect on the direction of Coloray International i.e., Coloray International and ABCO Electronics go up and down completely randomly.

Pair Corralation between Coloray International and ABCO Electronics

Assuming the 90 days trading horizon Coloray International Investment is expected to under-perform the ABCO Electronics. In addition to that, Coloray International is 1.17 times more volatile than ABCO Electronics Co. It trades about -0.01 of its total potential returns per unit of risk. ABCO Electronics Co is currently generating about 0.12 per unit of volatility. If you would invest  492,000  in ABCO Electronics Co on April 25, 2025 and sell it today you would earn a total of  65,000  from holding ABCO Electronics Co or generate 13.21% return on investment over 90 days.

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

Coloray International Investme  vs.  ABCO Electronics Co

Coloray International

Risk-Adjusted Performance

Very Weak

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

ABCO Electronics

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ABCO Electronics Co are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, ABCO Electronics sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Coloray International and ABCO Electronics

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

The idea behind Coloray International Investment and ABCO Electronics Co 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.