Correlation Between Salzer Electronics and Paramount Communications

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

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

Diversification Opportunities for Salzer Electronics and Paramount Communications

0.05

Correlation Coefficient

Salzer Electronics  Paramount Communications

Significant diversification

The 3 months correlation between Salzer and Paramount is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Salzer Electronics Limited and Paramount Communications Limit in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Paramount Communications and Salzer Electronics 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 Salzer Electronics Limited are associated (or correlated) with Paramount Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Paramount Communications has no effect on the direction of Salzer Electronics i.e., Salzer Electronics and Paramount Communications go up and down completely randomly.

Pair Corralation between Salzer Electronics and Paramount Communications

Assuming the 90 days trading horizon Salzer Electronics Limited is expected to under-perform the Paramount Communications. In addition to that, Salzer Electronics is 1.06 times more volatile than Paramount Communications Limited. It trades about -0.1 of its total potential returns per unit of risk. Paramount Communications Limited is currently generating about 0.07 per unit of volatility. If you would invest  5,162  in Paramount Communications Limited on March 18, 2025 and sell it today you would earn a total of  419.00  from holding Paramount Communications Limited or generate 8.12% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	97.62%
Values	Daily Returns

Salzer Electronics Limited  vs.  Paramount Communications Limit

Salzer Electronics

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Salzer Electronics Limited are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain essential indicators, Salzer Electronics may actually be approaching a critical reversion point that can send shares even higher in July 2025.

Paramount Communications

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Paramount Communications Limited are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak essential indicators, Paramount Communications may actually be approaching a critical reversion point that can send shares even higher in July 2025.

Pair Trading with Salzer Electronics and Paramount Communications

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

The idea behind Salzer Electronics Limited and Paramount Communications Limited 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.