Correlation Between CSP and Frequency Electronics

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

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

Diversification Opportunities for CSP and Frequency Electronics

-0.7

Correlation Coefficient

CSP  Frequency Electronics

Excellent diversification

The 3 months correlation between CSP and Frequency is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding CSP Inc and Frequency Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Frequency Electronics and CSP 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 CSP Inc are associated (or correlated) with Frequency Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Frequency Electronics has no effect on the direction of CSP i.e., CSP and Frequency Electronics go up and down completely randomly.

Pair Corralation between CSP and Frequency Electronics

Given the investment horizon of 90 days CSP Inc is expected to under-perform the Frequency Electronics. But the stock apears to be less risky and, when comparing its historical volatility, CSP Inc is 1.12 times less risky than Frequency Electronics. The stock trades about -0.15 of its potential returns per unit of risk. The Frequency Electronics is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  1,861  in Frequency Electronics on April 28, 2025 and sell it today you would earn a total of  937.00  from holding Frequency Electronics or generate 50.35% return on investment over 90 days.

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

CSP Inc  vs.  Frequency Electronics

CSP Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days CSP Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in August 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Frequency Electronics

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Frequency Electronics are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady forward indicators, Frequency Electronics displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CSP and Frequency Electronics

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

The idea behind CSP Inc and Frequency Electronics 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.