Correlation Between LGL and Murata Manufacturing

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

By analyzing existing cross correlation between LGL Group and Murata Manufacturing Co, you can compare the effects of market volatilities on LGL and Murata Manufacturing 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 Murata Manufacturing. Check out your portfolio center. Please also check ongoing floating volatility patterns of LGL and Murata Manufacturing.

Diversification Opportunities for LGL and Murata Manufacturing

-0.06

Correlation Coefficient

LGL  Murata Manufacturing

Good diversification

The 3 months correlation between LGL and Murata is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding LGL Group and Murata Manufacturing Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Murata Manufacturing 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 Murata Manufacturing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Murata Manufacturing has no effect on the direction of LGL i.e., LGL and Murata Manufacturing go up and down completely randomly.

Pair Corralation between LGL and Murata Manufacturing

Considering the 90-day investment horizon LGL is expected to generate 1.09 times less return on investment than Murata Manufacturing. But when comparing it to its historical volatility, LGL Group is 1.88 times less risky than Murata Manufacturing. It trades about 0.05 of its potential returns per unit of risk. Murata Manufacturing Co is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  1,711  in Murata Manufacturing Co on December 4, 2024 and sell it today you would earn a total of  113.00  from holding Murata Manufacturing Co or generate 6.6% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	94.09%
Values	Daily Returns

LGL Group  vs.  Murata Manufacturing Co

LGL Group

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in LGL Group are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite quite uncertain technical and fundamental indicators, LGL disclosed solid returns over the last few months and may actually be approaching a breakup point.

Murata Manufacturing

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Murata Manufacturing Co are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Murata Manufacturing reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with LGL and Murata Manufacturing

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

The idea behind LGL Group and Murata Manufacturing Co 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.