Correlation Between Radiant Opto and LandMark Optoelectronics

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

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

Diversification Opportunities for Radiant Opto and LandMark Optoelectronics

-0.04

Correlation Coefficient

Radiant Opto  LandMark Optoelectronics

Good diversification

The 3 months correlation between Radiant and LandMark is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding Radiant Opto Electronics Corp and LandMark Optoelectronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LandMark Optoelectronics and Radiant Opto 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 Radiant Opto Electronics Corp 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 Radiant Opto i.e., Radiant Opto and LandMark Optoelectronics go up and down completely randomly.

Pair Corralation between Radiant Opto and LandMark Optoelectronics

Assuming the 90 days trading horizon Radiant Opto is expected to generate 9.31 times less return on investment than LandMark Optoelectronics. But when comparing it to its historical volatility, Radiant Opto Electronics Corp is 2.55 times less risky than LandMark Optoelectronics. It trades about 0.05 of its potential returns per unit of risk. LandMark Optoelectronics is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  15,747  in LandMark Optoelectronics on September 30, 2024 and sell it today you would earn a total of  22,553  from holding LandMark Optoelectronics or generate 143.22% return on investment over 90 days.

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

Radiant Opto Electronics Corp  vs.  LandMark Optoelectronics

Radiant Opto Electro

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Radiant Opto Electronics Corp are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Radiant Opto 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

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in LandMark Optoelectronics are ranked lower than 9 (%) 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 Radiant Opto and LandMark Optoelectronics

The main advantage of trading using opposite Radiant Opto and LandMark Optoelectronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Radiant Opto 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 Radiant Opto Electronics Corp 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.