Correlation Between Eltek and Lakeland Industries

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

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

Diversification Opportunities for Eltek and Lakeland Industries

0.25

Correlation Coefficient

Eltek  Lakeland Industries

Modest diversification

The 3 months correlation between Eltek and Lakeland is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Eltek and Lakeland Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lakeland Industries and Eltek 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 Eltek are associated (or correlated) with Lakeland Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lakeland Industries has no effect on the direction of Eltek i.e., Eltek and Lakeland Industries go up and down completely randomly.

Pair Corralation between Eltek and Lakeland Industries

Given the investment horizon of 90 days Eltek is expected to generate 3.73 times less return on investment than Lakeland Industries. But when comparing it to its historical volatility, Eltek is 1.33 times less risky than Lakeland Industries. It trades about 0.12 of its potential returns per unit of risk. Lakeland Industries is currently generating about 0.32 of returns per unit of risk over similar time horizon. If you would invest  2,300  in Lakeland Industries on October 23, 2024 and sell it today you would earn a total of  304.00  from holding Lakeland Industries or generate 13.22% return on investment over 90 days.

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

Eltek  vs.  Lakeland Industries

Eltek

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Eltek are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite quite inconsistent basic indicators, Eltek may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Lakeland Industries

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Lakeland Industries are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady forward-looking signals, Lakeland Industries exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Eltek and Lakeland Industries

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

The idea behind Eltek and Lakeland Industries 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..