Correlation Between Ligitek Electronics and Penpower Technology

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

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

Diversification Opportunities for Ligitek Electronics and Penpower Technology

-0.17

Correlation Coefficient

Ligitek Electronics  Penpower Technology

Good diversification

The 3 months correlation between Ligitek and Penpower is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Ligitek Electronics Co and Penpower Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Penpower Technology and Ligitek Electronics 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 Ligitek Electronics Co are associated (or correlated) with Penpower Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Penpower Technology has no effect on the direction of Ligitek Electronics i.e., Ligitek Electronics and Penpower Technology go up and down completely randomly.

Pair Corralation between Ligitek Electronics and Penpower Technology

Assuming the 90 days trading horizon Ligitek Electronics Co is expected to generate 2.83 times more return on investment than Penpower Technology. However, Ligitek Electronics is 2.83 times more volatile than Penpower Technology. It trades about 0.48 of its potential returns per unit of risk. Penpower Technology is currently generating about -0.11 per unit of risk. If you would invest  3,965  in Ligitek Electronics Co on September 27, 2024 and sell it today you would earn a total of  1,505  from holding Ligitek Electronics Co or generate 37.96% return on investment over 90 days.

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

Ligitek Electronics Co  vs.  Penpower Technology

Ligitek Electronics

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Ligitek Electronics Co are ranked lower than 16 (%) 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.

Penpower Technology

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Penpower Technology are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Penpower Technology is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Ligitek Electronics and Penpower Technology

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

The idea behind Ligitek Electronics Co and Penpower Technology 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.