Correlation Between LandMark Optoelectronics and Microelectronics

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

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

Diversification Opportunities for LandMark Optoelectronics and Microelectronics

0.42

Correlation Coefficient

LandMark Optoelectronics  Microelectronics

Very weak diversification

The 3 months correlation between LandMark and Microelectronics is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding LandMark Optoelectronics and Microelectronics Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Microelectronics Tec and LandMark Optoelectronics 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 LandMark Optoelectronics are associated (or correlated) with Microelectronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Microelectronics Tec has no effect on the direction of LandMark Optoelectronics i.e., LandMark Optoelectronics and Microelectronics go up and down completely randomly.

Pair Corralation between LandMark Optoelectronics and Microelectronics

Assuming the 90 days trading horizon LandMark Optoelectronics is expected to generate 1.4 times more return on investment than Microelectronics. However, LandMark Optoelectronics is 1.4 times more volatile than Microelectronics Technology. It trades about 0.09 of its potential returns per unit of risk. Microelectronics Technology is currently generating about -0.01 per unit of risk. If you would invest  10,411  in LandMark Optoelectronics on September 15, 2024 and sell it today you would earn a total of  25,389  from holding LandMark Optoelectronics or generate 243.87% return on investment over 90 days.

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

LandMark Optoelectronics  vs.  Microelectronics Technology

LandMark Optoelectronics

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in LandMark Optoelectronics are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, LandMark Optoelectronics showed solid returns over the last few months and may actually be approaching a breakup point.

Microelectronics Tec

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Microelectronics Technology has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Microelectronics 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 LandMark Optoelectronics and Microelectronics

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

The idea behind LandMark Optoelectronics and Microelectronics Technology 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.