Correlation Between Alps Electric and LGL

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

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

Diversification Opportunities for Alps Electric and LGL

0.01

Correlation Coefficient

Alps Electric  LGL

Significant diversification

The 3 months correlation between Alps and LGL is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Alps Electric Co and LGL Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LGL Group and Alps Electric 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 Alps Electric Co are associated (or correlated) with LGL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LGL Group has no effect on the direction of Alps Electric i.e., Alps Electric and LGL go up and down completely randomly.

Pair Corralation between Alps Electric and LGL

Assuming the 90 days horizon Alps Electric Co is expected to generate 0.4 times more return on investment than LGL. However, Alps Electric Co is 2.49 times less risky than LGL. It trades about 0.21 of its potential returns per unit of risk. LGL Group is currently generating about -0.02 per unit of risk. If you would invest  2,023  in Alps Electric Co on September 16, 2024 and sell it today you would earn a total of  88.00  from holding Alps Electric Co or generate 4.35% return on investment over 90 days.

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

Alps Electric Co  vs.  LGL Group

Alps Electric

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Alps Electric Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong essential indicators, Alps Electric is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

LGL Group

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in LGL Group are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent technical and fundamental indicators, LGL is not utilizing all of its potentials. The newest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Alps Electric and LGL

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

The idea behind Alps Electric Co and LGL Group 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.