Correlation Between CompX International and Servotronics

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

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

Diversification Opportunities for CompX International and Servotronics

0.1

Correlation Coefficient

CompX International  Servotronics

Average diversification

The 3 months correlation between CompX and Servotronics is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding CompX International and Servotronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Servotronics and CompX 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 CompX International are associated (or correlated) with Servotronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Servotronics has no effect on the direction of CompX International i.e., CompX International and Servotronics go up and down completely randomly.

Pair Corralation between CompX International and Servotronics

Considering the 90-day investment horizon CompX International is expected to generate 27.17 times less return on investment than Servotronics. But when comparing it to its historical volatility, CompX International is 12.21 times less risky than Servotronics. It trades about 0.08 of its potential returns per unit of risk. Servotronics is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  1,047  in Servotronics on May 13, 2025 and sell it today you would earn a total of  3,647  from holding Servotronics or generate 348.33% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	57.14%
Values	Daily Returns

CompX International  vs.  Servotronics

CompX International

Risk-Adjusted Performance

Soft

Compared to the overall equity markets, risk-adjusted returns on investments in CompX International are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly conflicting forward indicators, CompX International showed solid returns over the last few months and may actually be approaching a breakup point.

Servotronics

Risk-Adjusted Performance

Good

Over the last 90 days Servotronics has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively unsteady basic indicators, Servotronics unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CompX International and Servotronics

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

The idea behind CompX International and Servotronics 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.