Correlation Between Information Technology and Lemtech Holdings

Can any of the company-specific risk be diversified away by investing in both Information Technology and Lemtech Holdings 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 Information Technology and Lemtech Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Information Technology Total and Lemtech Holdings Co, you can compare the effects of market volatilities on Information Technology and Lemtech Holdings 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 Information Technology with a short position of Lemtech Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Information Technology and Lemtech Holdings.

Diversification Opportunities for Information Technology and Lemtech Holdings

0.59

Correlation Coefficient

Information Technology  Lemtech Holdings

Very weak diversification

The 3 months correlation between Information and Lemtech is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Information Technology Total and Lemtech Holdings Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lemtech Holdings and Information Technology 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 Information Technology Total are associated (or correlated) with Lemtech Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lemtech Holdings has no effect on the direction of Information Technology i.e., Information Technology and Lemtech Holdings go up and down completely randomly.

Pair Corralation between Information Technology and Lemtech Holdings

Assuming the 90 days trading horizon Information Technology is expected to generate 1.91 times less return on investment than Lemtech Holdings. But when comparing it to its historical volatility, Information Technology Total is 1.06 times less risky than Lemtech Holdings. It trades about 0.1 of its potential returns per unit of risk. Lemtech Holdings Co is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  10,300  in Lemtech Holdings Co on September 13, 2024 and sell it today you would earn a total of  2,900  from holding Lemtech Holdings Co or generate 28.16% return on investment over 90 days.

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

Information Technology Total  vs.  Lemtech Holdings Co

Information Technology

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Information Technology Total are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Information Technology showed solid returns over the last few months and may actually be approaching a breakup point.

Lemtech Holdings

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Lemtech Holdings Co are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Lemtech Holdings showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Information Technology and Lemtech Holdings

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

The idea behind Information Technology Total and Lemtech Holdings 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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.