Correlation Between Est Global and LandMark Optoelectronics

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

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

Diversification Opportunities for Est Global and LandMark Optoelectronics

0.08

Correlation Coefficient

Est Global  LandMark Optoelectronics

Significant diversification

The 3 months correlation between Est and LandMark is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Est Global Apparel and LandMark Optoelectronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LandMark Optoelectronics and Est Global 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 Est Global Apparel are associated (or correlated) with LandMark Optoelectronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LandMark Optoelectronics has no effect on the direction of Est Global i.e., Est Global and LandMark Optoelectronics go up and down completely randomly.

Pair Corralation between Est Global and LandMark Optoelectronics

Assuming the 90 days trading horizon Est Global is expected to generate 16.21 times less return on investment than LandMark Optoelectronics. But when comparing it to its historical volatility, Est Global Apparel is 1.84 times less risky than LandMark Optoelectronics. It trades about 0.02 of its potential returns per unit of risk. LandMark Optoelectronics is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  21,450  in LandMark Optoelectronics on September 18, 2024 and sell it today you would earn a total of  14,800  from holding LandMark Optoelectronics or generate 69.0% return on investment over 90 days.

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

Est Global Apparel  vs.  LandMark Optoelectronics

Est Global Apparel

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Est Global Apparel are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Est Global is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

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.

Pair Trading with Est Global and LandMark Optoelectronics

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

The idea behind Est Global Apparel and LandMark Optoelectronics 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.