Correlation Between Knowles Cor and Lantronix

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

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

Diversification Opportunities for Knowles Cor and Lantronix

0.58

Correlation Coefficient

Knowles Cor  Lantronix

Very weak diversification

The 3 months correlation between Knowles and Lantronix is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Knowles Cor and Lantronix in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lantronix and Knowles Cor 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 Knowles Cor 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 Knowles Cor i.e., Knowles Cor and Lantronix go up and down completely randomly.

Pair Corralation between Knowles Cor and Lantronix

Allowing for the 90-day total investment horizon Knowles Cor is expected to under-perform the Lantronix. But the stock apears to be less risky and, when comparing its historical volatility, Knowles Cor is 3.53 times less risky than Lantronix. The stock trades about -0.21 of its potential returns per unit of risk. The Lantronix is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest  305.00  in Lantronix on November 30, 2024 and sell it today you would lose (51.50) from holding Lantronix or give up 16.89% of portfolio value over 90 days.

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

Knowles Cor  vs.  Lantronix

Knowles Cor

Risk-Adjusted Performance

Very Weak

Over the last 90 days Knowles Cor has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in March 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Lantronix

Risk-Adjusted Performance

Very Weak

Over the last 90 days Lantronix has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest inconsistent performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Knowles Cor and Lantronix

The main advantage of trading using opposite Knowles Cor and Lantronix positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Knowles Cor 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 Knowles Cor 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.