Correlation Between LGL and Bel Fuse

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

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

Diversification Opportunities for LGL and Bel Fuse

0.01

Correlation Coefficient

LGL  Bel Fuse

Significant diversification

The 3 months correlation between LGL and Bel is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding LGL Group and Bel Fuse A in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bel Fuse A and LGL 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 LGL Group are associated (or correlated) with Bel Fuse. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bel Fuse A has no effect on the direction of LGL i.e., LGL and Bel Fuse go up and down completely randomly.

Pair Corralation between LGL and Bel Fuse

Considering the 90-day investment horizon LGL is expected to generate 13.04 times less return on investment than Bel Fuse. In addition to that, LGL is 1.47 times more volatile than Bel Fuse A. It trades about 0.01 of its total potential returns per unit of risk. Bel Fuse A is currently generating about 0.1 per unit of volatility. If you would invest  8,535  in Bel Fuse A on September 2, 2024 and sell it today you would earn a total of  1,131  from holding Bel Fuse A or generate 13.25% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

LGL Group  vs.  Bel Fuse A

LGL Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days LGL Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent technical and fundamental indicators, LGL is not utilizing all of its potentials. The recent stock price mess, may contribute to short-term losses for the institutional investors.

Bel Fuse A

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Bel Fuse A are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat conflicting technical and fundamental indicators, Bel Fuse sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with LGL and Bel Fuse

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

The idea behind LGL Group and Bel Fuse A 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.