Correlation Between LARGAN Precision and Ablerex Electronics

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

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

Diversification Opportunities for LARGAN Precision and Ablerex Electronics

0.25

Correlation Coefficient

LARGAN Precision  Ablerex Electronics

Modest diversification

The 3 months correlation between LARGAN and Ablerex is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding LARGAN Precision Co and Ablerex Electronics Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ablerex Electronics and LARGAN Precision 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 LARGAN Precision Co are associated (or correlated) with Ablerex Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ablerex Electronics has no effect on the direction of LARGAN Precision i.e., LARGAN Precision and Ablerex Electronics go up and down completely randomly.

Pair Corralation between LARGAN Precision and Ablerex Electronics

Assuming the 90 days trading horizon LARGAN Precision Co is expected to generate 0.72 times more return on investment than Ablerex Electronics. However, LARGAN Precision Co is 1.4 times less risky than Ablerex Electronics. It trades about 0.14 of its potential returns per unit of risk. Ablerex Electronics Co is currently generating about 0.04 per unit of risk. If you would invest  237,000  in LARGAN Precision Co on October 24, 2024 and sell it today you would earn a total of  39,500  from holding LARGAN Precision Co or generate 16.67% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

LARGAN Precision Co  vs.  Ablerex Electronics Co

LARGAN Precision

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in LARGAN Precision Co are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, LARGAN Precision showed solid returns over the last few months and may actually be approaching a breakup point.

Ablerex Electronics

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Ablerex Electronics Co are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Ablerex Electronics is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with LARGAN Precision and Ablerex Electronics

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

The idea behind LARGAN Precision Co and Ablerex Electronics Co 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.