Correlation Between LARGAN Precision and ITEQ Corp

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

Diversification Opportunities for LARGAN Precision and ITEQ Corp

-0.5

Correlation Coefficient

LARGAN Precision  ITEQ Corp

Very good diversification

The 3 months correlation between LARGAN and ITEQ is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding LARGAN Precision Co and ITEQ Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ITEQ Corp 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 ITEQ Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ITEQ Corp has no effect on the direction of LARGAN Precision i.e., LARGAN Precision and ITEQ Corp go up and down completely randomly.

Pair Corralation between LARGAN Precision and ITEQ Corp

Assuming the 90 days trading horizon LARGAN Precision is expected to generate 2.31 times less return on investment than ITEQ Corp. In addition to that, LARGAN Precision is 1.12 times more volatile than ITEQ Corp. It trades about 0.02 of its total potential returns per unit of risk. ITEQ Corp is currently generating about 0.06 per unit of volatility. If you would invest  7,430  in ITEQ Corp on September 16, 2024 and sell it today you would earn a total of  330.00  from holding ITEQ Corp or generate 4.44% return on investment over 90 days.

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

LARGAN Precision Co  vs.  ITEQ Corp

LARGAN Precision

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days LARGAN Precision Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, LARGAN Precision is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

ITEQ Corp

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in ITEQ Corp are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, ITEQ Corp 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 ITEQ Corp

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

The idea behind LARGAN Precision Co and ITEQ Corp 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 Anywhere module to track or share privately all of your investments from the convenience of any device.