Correlation Between LARGAN Precision and Excellence Optoelectronic

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

Diversification Opportunities for LARGAN Precision and Excellence Optoelectronic

-0.65

Correlation Coefficient

LARGAN Precision  Excellence Optoelectronic

Excellent diversification

The 3 months correlation between LARGAN and Excellence is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding LARGAN Precision Co and Excellence Optoelectronic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Excellence Optoelectronic 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 Excellence Optoelectronic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Excellence Optoelectronic has no effect on the direction of LARGAN Precision i.e., LARGAN Precision and Excellence Optoelectronic go up and down completely randomly.

Pair Corralation between LARGAN Precision and Excellence Optoelectronic

Assuming the 90 days trading horizon LARGAN Precision Co is expected to generate 1.05 times more return on investment than Excellence Optoelectronic. However, LARGAN Precision is 1.05 times more volatile than Excellence Optoelectronic. It trades about 0.09 of its potential returns per unit of risk. Excellence Optoelectronic is currently generating about -0.11 per unit of risk. If you would invest  250,500  in LARGAN Precision Co on December 5, 2024 and sell it today you would earn a total of  20,500  from holding LARGAN Precision Co or generate 8.18% return on investment over 90 days.

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

LARGAN Precision Co  vs.  Excellence Optoelectronic

LARGAN Precision

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in LARGAN Precision Co are ranked lower than 7 (%) 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 April 2025.

Excellence Optoelectronic

Risk-Adjusted Performance

Very Weak

Over the last 90 days Excellence Optoelectronic has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Pair Trading with LARGAN Precision and Excellence Optoelectronic

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

The idea behind LARGAN Precision Co and Excellence Optoelectronic 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.