Correlation Between Genius Electronic and LARGAN Precision

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

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

Diversification Opportunities for Genius Electronic and LARGAN Precision

0.61

Correlation Coefficient

Genius Electronic  LARGAN Precision

Poor diversification

The 3 months correlation between Genius and LARGAN is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Genius Electronic Optical and LARGAN Precision Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LARGAN Precision and Genius Electronic 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 Genius Electronic Optical are associated (or correlated) with LARGAN Precision. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LARGAN Precision has no effect on the direction of Genius Electronic i.e., Genius Electronic and LARGAN Precision go up and down completely randomly.

Pair Corralation between Genius Electronic and LARGAN Precision

Assuming the 90 days trading horizon Genius Electronic Optical is expected to under-perform the LARGAN Precision. But the stock apears to be less risky and, when comparing its historical volatility, Genius Electronic Optical is 1.19 times less risky than LARGAN Precision. The stock trades about -0.21 of its potential returns per unit of risk. The LARGAN Precision Co is currently generating about -0.08 of returns per unit of risk over similar time horizon. If you would invest  265,000  in LARGAN Precision Co on December 30, 2024 and sell it today you would lose (25,500) from holding LARGAN Precision Co or give up 9.62% of portfolio value over 90 days.

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

Genius Electronic Optical  vs.  LARGAN Precision Co

Genius Electronic Optical

Risk-Adjusted Performance

Very Weak

Over the last 90 days Genius Electronic Optical has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in April 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

LARGAN Precision

Risk-Adjusted Performance

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 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 Genius Electronic and LARGAN Precision

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

The idea behind Genius Electronic Optical and LARGAN Precision 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.

Check out your portfolio center.

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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.