Correlation Between Extreme Networks and Lantronix

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

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

Diversification Opportunities for Extreme Networks and Lantronix

-0.35

Correlation Coefficient

Extreme Networks  Lantronix

Very good diversification

The 3 months correlation between Extreme and Lantronix is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Extreme Networks and Lantronix in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lantronix and Extreme Networks 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 Extreme Networks are associated (or correlated) with Lantronix. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lantronix has no effect on the direction of Extreme Networks i.e., Extreme Networks and Lantronix go up and down completely randomly.

Pair Corralation between Extreme Networks and Lantronix

Given the investment horizon of 90 days Extreme Networks is expected to under-perform the Lantronix. But the stock apears to be less risky and, when comparing its historical volatility, Extreme Networks is 2.24 times less risky than Lantronix. The stock trades about -0.14 of its potential returns per unit of risk. The Lantronix is currently generating about 0.39 of returns per unit of risk over similar time horizon. If you would invest  325.00  in Lantronix on October 7, 2024 and sell it today you would earn a total of  98.00  from holding Lantronix or generate 30.15% return on investment over 90 days.

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

Extreme Networks  vs.  Lantronix

Extreme Networks

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Extreme Networks are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating basic indicators, Extreme Networks reported solid returns over the last few months and may actually be approaching a breakup point.

Lantronix

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Lantronix are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly inconsistent basic indicators, Lantronix showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Extreme Networks and Lantronix

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

The idea behind Extreme Networks and Lantronix 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.