Correlation Between Loctek Ergonomic and HOB Biotech

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

By analyzing existing cross correlation between Loctek Ergonomic Technology and HOB Biotech Group, you can compare the effects of market volatilities on Loctek Ergonomic and HOB Biotech 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 Loctek Ergonomic with a short position of HOB Biotech. Check out your portfolio center. Please also check ongoing floating volatility patterns of Loctek Ergonomic and HOB Biotech.

Diversification Opportunities for Loctek Ergonomic and HOB Biotech

0.45

Correlation Coefficient

Loctek Ergonomic  HOB Biotech

Very weak diversification

The 3 months correlation between Loctek and HOB is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Loctek Ergonomic Technology and HOB Biotech Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HOB Biotech Group and Loctek Ergonomic 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 Loctek Ergonomic Technology are associated (or correlated) with HOB Biotech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HOB Biotech Group has no effect on the direction of Loctek Ergonomic i.e., Loctek Ergonomic and HOB Biotech go up and down completely randomly.

Pair Corralation between Loctek Ergonomic and HOB Biotech

Assuming the 90 days trading horizon Loctek Ergonomic Technology is expected to generate 0.57 times more return on investment than HOB Biotech. However, Loctek Ergonomic Technology is 1.74 times less risky than HOB Biotech. It trades about -0.08 of its potential returns per unit of risk. HOB Biotech Group is currently generating about -0.27 per unit of risk. If you would invest  1,669  in Loctek Ergonomic Technology on October 22, 2024 and sell it today you would lose (136.00) from holding Loctek Ergonomic Technology or give up 8.15% of portfolio value over 90 days.

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

Loctek Ergonomic Technology  vs.  HOB Biotech Group

Loctek Ergonomic Tec

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Loctek Ergonomic Technology has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

HOB Biotech Group

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in HOB Biotech Group are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, HOB Biotech sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Loctek Ergonomic and HOB Biotech

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

The idea behind Loctek Ergonomic Technology and HOB Biotech Group 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.