Correlation Between LARGAN Precision and Cipherlab

Can any of the company-specific risk be diversified away by investing in both LARGAN Precision and Cipherlab 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 Cipherlab 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 Cipherlab Co, you can compare the effects of market volatilities on LARGAN Precision and Cipherlab 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 Cipherlab. Check out your portfolio center. Please also check ongoing floating volatility patterns of LARGAN Precision and Cipherlab.

Diversification Opportunities for LARGAN Precision and Cipherlab

-0.51

Correlation Coefficient

LARGAN Precision  Cipherlab

Excellent diversification

The 3 months correlation between LARGAN and Cipherlab is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding LARGAN Precision Co and Cipherlab Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cipherlab 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 Cipherlab. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cipherlab has no effect on the direction of LARGAN Precision i.e., LARGAN Precision and Cipherlab go up and down completely randomly.

Pair Corralation between LARGAN Precision and Cipherlab

Assuming the 90 days trading horizon LARGAN Precision is expected to generate 1.87 times less return on investment than Cipherlab. But when comparing it to its historical volatility, LARGAN Precision Co is 1.47 times less risky than Cipherlab. It trades about 0.04 of its potential returns per unit of risk. Cipherlab Co is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  1,679  in Cipherlab Co on October 9, 2024 and sell it today you would earn a total of  911.00  from holding Cipherlab Co or generate 54.26% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	99.79%
Values	Daily Returns

LARGAN Precision Co  vs.  Cipherlab Co

LARGAN Precision

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in LARGAN Precision Co are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, LARGAN Precision may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Cipherlab

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Cipherlab Co are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Cipherlab 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 Cipherlab

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

The idea behind LARGAN Precision Co and Cipherlab 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.