Correlation Between General Plastic and Ligitek Electronics

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

By analyzing existing cross correlation between General Plastic Industrial and Ligitek Electronics Co, you can compare the effects of market volatilities on General Plastic and Ligitek 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 General Plastic with a short position of Ligitek Electronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of General Plastic and Ligitek Electronics.

Diversification Opportunities for General Plastic and Ligitek Electronics

0.46

Correlation Coefficient

General Plastic  Ligitek Electronics

Very weak diversification

The 3 months correlation between General and Ligitek is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding General Plastic Industrial and Ligitek Electronics Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ligitek Electronics and General Plastic 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 General Plastic Industrial are associated (or correlated) with Ligitek Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ligitek Electronics has no effect on the direction of General Plastic i.e., General Plastic and Ligitek Electronics go up and down completely randomly.

Pair Corralation between General Plastic and Ligitek Electronics

Assuming the 90 days trading horizon General Plastic Industrial is expected to generate 0.17 times more return on investment than Ligitek Electronics. However, General Plastic Industrial is 6.03 times less risky than Ligitek Electronics. It trades about 0.23 of its potential returns per unit of risk. Ligitek Electronics Co is currently generating about 0.03 per unit of risk. If you would invest  3,400  in General Plastic Industrial on December 30, 2024 and sell it today you would earn a total of  320.00  from holding General Plastic Industrial or generate 9.41% return on investment over 90 days.

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

General Plastic Industrial  vs.  Ligitek Electronics Co

General Plastic Indu

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in General Plastic Industrial are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, General Plastic may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Ligitek Electronics

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Ligitek Electronics Co are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Ligitek Electronics may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with General Plastic and Ligitek Electronics

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

The idea behind General Plastic Industrial and Ligitek Electronics 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.

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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 Global Correlations module to find global opportunities by holding instruments from different markets.