Correlation Between Littelfuse and Plexus Corp

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

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

Diversification Opportunities for Littelfuse and Plexus Corp

-0.36

Correlation Coefficient

Littelfuse  Plexus Corp

Very good diversification

The 3 months correlation between Littelfuse and Plexus is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Littelfuse and Plexus Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Plexus Corp and Littelfuse 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 Littelfuse are associated (or correlated) with Plexus Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Plexus Corp has no effect on the direction of Littelfuse i.e., Littelfuse and Plexus Corp go up and down completely randomly.

Pair Corralation between Littelfuse and Plexus Corp

Given the investment horizon of 90 days Littelfuse is expected to under-perform the Plexus Corp. But the stock apears to be less risky and, when comparing its historical volatility, Littelfuse is 1.47 times less risky than Plexus Corp. The stock trades about -0.03 of its potential returns per unit of risk. The Plexus Corp is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  14,658  in Plexus Corp on August 31, 2024 and sell it today you would earn a total of  1,782  from holding Plexus Corp or generate 12.16% return on investment over 90 days.

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

Littelfuse  vs.  Plexus Corp

Littelfuse

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Littelfuse has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Littelfuse is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Plexus Corp

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Plexus Corp are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, Plexus Corp unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Littelfuse and Plexus Corp

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

The idea behind Littelfuse and Plexus Corp 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.