Correlation Between AV Tech and Ligitek Electronics

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

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

Diversification Opportunities for AV Tech and Ligitek Electronics

-0.65

Correlation Coefficient

AV Tech  Ligitek Electronics

Excellent diversification

The 3 months correlation between 8072 and Ligitek is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding AV Tech Corp and Ligitek Electronics Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ligitek Electronics and AV Tech 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 AV Tech Corp 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 AV Tech i.e., AV Tech and Ligitek Electronics go up and down completely randomly.

Pair Corralation between AV Tech and Ligitek Electronics

Assuming the 90 days trading horizon AV Tech Corp is expected to under-perform the Ligitek Electronics. But the stock apears to be less risky and, when comparing its historical volatility, AV Tech Corp is 2.35 times less risky than Ligitek Electronics. The stock trades about -0.11 of its potential returns per unit of risk. The Ligitek Electronics Co is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  2,310  in Ligitek Electronics Co on September 30, 2024 and sell it today you would earn a total of  3,080  from holding Ligitek Electronics Co or generate 133.33% return on investment over 90 days.

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

AV Tech Corp  vs.  Ligitek Electronics Co

AV Tech Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AV Tech Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Ligitek Electronics

Risk-Adjusted Performance

14 of 100

Good

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

Pair Trading with AV Tech and Ligitek Electronics

The main advantage of trading using opposite AV Tech and Ligitek Electronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AV Tech 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 AV Tech Corp 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.