Correlation Between Lear and Optec International

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

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

Diversification Opportunities for Lear and Optec International

0.14

Correlation Coefficient

Lear  Optec International

Average diversification

The 3 months correlation between Lear and Optec is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Lear Corp. and Optec International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Optec International and Lear 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 Lear Corporation are associated (or correlated) with Optec International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Optec International has no effect on the direction of Lear i.e., Lear and Optec International go up and down completely randomly.

Pair Corralation between Lear and Optec International

If you would invest  9,784  in Lear Corporation on September 14, 2024 and sell it today you would lose (10.00) from holding Lear Corporation or give up 0.1% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	4.55%
Values	Daily Returns

Lear Corp.  vs.  Optec International

Lear

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lear Corporation has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong technical and fundamental indicators, Lear is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Optec International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Optec International has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, Optec International is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Lear and Optec International

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

The idea behind Lear Corporation and Optec International 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.