Correlation Between Taitron Components and Frequency Electronics

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

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

Diversification Opportunities for Taitron Components and Frequency Electronics

0.2

Correlation Coefficient

Taitron Components  Frequency Electronics

Modest diversification

The 3 months correlation between Taitron and Frequency is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Taitron Components Incorporate and Frequency Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Frequency Electronics and Taitron Components 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 Taitron Components Incorporated 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 Taitron Components i.e., Taitron Components and Frequency Electronics go up and down completely randomly.

Pair Corralation between Taitron Components and Frequency Electronics

Given the investment horizon of 90 days Taitron Components is expected to generate 20.54 times less return on investment than Frequency Electronics. But when comparing it to its historical volatility, Taitron Components Incorporated is 2.94 times less risky than Frequency Electronics. It trades about 0.02 of its potential returns per unit of risk. Frequency Electronics is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  1,807  in Frequency Electronics on May 5, 2025 and sell it today you would earn a total of  838.00  from holding Frequency Electronics or generate 46.38% return on investment over 90 days.

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

Taitron Components Incorporate  vs.  Frequency Electronics

Taitron Components

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Taitron Components Incorporated are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable forward indicators, Taitron Components is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

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 Taitron Components and Frequency Electronics

The main advantage of trading using opposite Taitron Components and Frequency Electronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Taitron Components 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 Taitron Components Incorporated 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.