Correlation Between Darwin Precisions and Ledtech Electronics

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

By analyzing existing cross correlation between Darwin Precisions Corp and Ledtech Electronics Corp, you can compare the effects of market volatilities on Darwin Precisions and Ledtech Electronics 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 Darwin Precisions with a short position of Ledtech Electronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Darwin Precisions and Ledtech Electronics.

Diversification Opportunities for Darwin Precisions and Ledtech Electronics

0.87

Correlation Coefficient

Darwin Precisions  Ledtech Electronics

Very poor diversification

The 3 months correlation between Darwin and Ledtech is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Darwin Precisions Corp and Ledtech Electronics Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ledtech Electronics Corp and Darwin Precisions 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 Darwin Precisions Corp are associated (or correlated) with Ledtech Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ledtech Electronics Corp has no effect on the direction of Darwin Precisions i.e., Darwin Precisions and Ledtech Electronics go up and down completely randomly.

Pair Corralation between Darwin Precisions and Ledtech Electronics

Assuming the 90 days trading horizon Darwin Precisions Corp is expected to generate 0.93 times more return on investment than Ledtech Electronics. However, Darwin Precisions Corp is 1.08 times less risky than Ledtech Electronics. It trades about -0.12 of its potential returns per unit of risk. Ledtech Electronics Corp is currently generating about -0.15 per unit of risk. If you would invest  1,275  in Darwin Precisions Corp on October 23, 2024 and sell it today you would lose (55.00) from holding Darwin Precisions Corp or give up 4.31% of portfolio value over 90 days.

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

Darwin Precisions Corp  vs.  Ledtech Electronics Corp

Darwin Precisions Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Darwin Precisions Corp 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 February 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Ledtech Electronics Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ledtech Electronics Corp 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 February 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Darwin Precisions and Ledtech Electronics

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

The idea behind Darwin Precisions Corp and Ledtech Electronics 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.